Small Business Economic Outlook Remains Cautious

The economic confidence of American small business owners remains largely unchanged in October, rising less than 1 point from the previous month on the Discover® Small Business WatchSM index. The Watch rose from 87.7 in September to 88.5 in October, with only one key measurement – business investment – showing any significant change.

“Small business owners aren’t showing any new optimism in the economy,” said Ryan Scully, director of Discover’s business credit card. “Half of them think it will take more than 12 months before most people feel the economy has stabilized, and two out of three are expecting to dig into their own pockets to stay afloat.”

One of the only key measurements to show any significant change from September is the likelihood of investing in business development in the next six months in areas such as advertising and capital expenditures. On the positive side, the number of those who said they plan to decrease spending dropped from 50 percent in September to 44 percent in October. However, the number of those planning no changes jumped from 22 percent to 32 percent. Those who are planning to increase spending dropped from 25 percent to 23 percent.

“This could indicate that any significant expansion and investment in the small business sector isn’t likely to arrive for quite a while,” Scully said. “They’re holding on to their money.”

October Highlights:

     

  • 55 percent of small business owners rate the economy as poor, up from 53 percent in September and 48 percent in August; 36 percent rate it as fair and only 8 percent say it is excellent or good.
  •  

  • 44 percent of small business owners think the economy is getting worse, down from 46 percent in September; 35 percent of owners say the economy is getting better, up from 33 percent in September.
  •  

  • 44 percent of owners say they have experienced cash flow issues in the past 90 days, down from 46 percent in September.
  •  

  • 29 percent of small business owners see economic conditions for their businesses improving, unchanged from September, while 43 percent see their own conditions getting worse, down two percentage points over last month.
  •  

 

Majority of Owners Say Small Businesses Will Lead U.S. Recovery

When asked whether small businesses will lead the U.S. economy to recovery or trail it, 53 percent say the sector will be out front, 29 percent say following the recovery is more likely, and 18 percent aren’t sure.

As for when that might happen, half of all owners say that it will be more than 12 months before most people feel that the economy has stabilized, 28 percent say it will take six to 12 months, 13 percent say it could take less than six months, and 9 percent weren’t sure.

Sixty-nine percent of owners say that the current economic climate has hurt their business. Of this group, 43 percent say it will be more than 12 months before their businesses rebound, 24 percent say it will take six to 12 months, 13 percent think that they’ll be on safe ground in less than six months, and 20 percent couldn’t venture a guess.

6 in 10 Small Business Owners Are Likely to Tap Personal Assets to Stay Afloat

Forty percent of small business owners say it is “very likely” that they will need to borrow from their personal assets over the next 12 months in order to stay in business, while 21 percent say that it is “somewhat likely,” 34 percent say it is “not very likely” or “not at all likely” they will take similar measures, and 4 percent weren’t sure.

At the same time, most small business owners say they do not plan to ask friends and family for financial support: 67 percent of owners say that it is “not very likely” or “not at all likely” they will ask loved ones for money, and 31 percent say it is “very likely” or “somewhat likely” they will borrow from friends and relatives.

SBA Loans Remain Unpopular

Small business owners are also clearly not interested in Small Business Administration loans. Ninety percent of owners say that they have never applied for an SBA loan. When presented with a list of several reasons why not, 48 percent say that they did not need an SBA loan, 15 percent say they are unfamiliar with the programs, 14 percent say they received funding from another source, 9 percent say it takes too much time, 9 percent say they would rather use their personal assets, and 6 percent say they have some other reason or are not sure.

Competition Takes Its Toll

When asked about the competitive landscape, a majority, 56 percent, of small business owners say competition stayed about the same in the past six months, while 25 percent say it increased, and 18 percent say it decreased.

Of those that have experienced increased competition in the past six months, 61 percent say that their sales have been hurt by it, 14 percent say it has helped sales, 18 percent said it had no impact and 4 percent weren’t sure.

Among those who have experienced less competition in the past six months, 47 percent say that they have seen no impact to their sales, 26 percent say that it has helped sales, 24 percent say it has hurt their sales, and 4 percent weren’t sure.

Biggest Issue Facing Small Businesses

When asked to select the biggest issue facing their businesses right now from a list of possibilities, small business owners chose the following:

     

  • Sales generation, 28 percent
  •  

  • Taxes, 22 percent
  •  

  • Operating costs, 15 percent
  •  

  • Health insurance, 10 percent
  •  

  • Access to capital, 5 percent
  •  

  • Inflation, 4 percent
  •  

  • Some other issue, 6 percent
  •  

  • Not sure, 10 percent
  •  

 

The views and opinions expressed by small business owners and consumers who participate in the Small Business Watch survey are their own and do not necessarily reflect those of Discover Financial Services or its affiliates.

About the Small Business Watch

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of U.S. small business owners who have less than five employees, a segment that consists of 22 million businesses producing more than a trillion dollars in annual receipts. The Watch is based on a national random survey of 750 small business owners. It is commissioned by Discover Business card, which strives to offer the best business credit card for American small businesses, and is conducted by Rasmussen Reports, LLC (www.rasmussenreports.com), an independent survey research firm. The numeric index is calculated by assigning values to responses to a set of six consistent questions. The base value of the Watch was established at 100.0 based on surveys conducted in August 2006. In addition to generating the index, the Small Business Watch surveys small business owners every month on key issues, and polls 3,000 consumers four times per year to gauge purchasing behavior and attitudes towards small businesses. For past results and survey data, visit www.discovercard.com/business/watch. For information on Discover Business card, visit www.discovercard.com/business.

About Discover

Discover Financial Services (NYSE: DFS) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America’s cash rewards pioneer, and offers student and personal loans, as well as savings products such as certificates of deposit and money market accounts. Its payments businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation’s leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in 185 countries and territories. For more information, visit www.discoverfinancial.com.

Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6082200&lang=en

 

——————————–

Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 AML/KYC Tracker Report provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

1 Comment

TRENDING RIGHT NOW

To Top