Discover Financial Services (ticker: DFS, exchange: New York Stock Exchange (.N))
News Release -
Discover(R) Small Business Watch(SM): Small Business Economic Confidence at Lowest Point in Past Year
Small Business Economic Confidence at Lowest Point in Past Year
Owners Feel Cash Flow Strain But Express More Optimism That
Business Will Improve Before Year-End
POLL: Small Business Owners Who Extend Credit Experiencing Payment
RIVERWOODS, Ill.--(BUSINESS WIRE)--Sept. 24, 2007--Economic
confidence among small business owners fell to its lowest point in a
year in September marked mainly by increasing cash flow issues,
according to the Discover(R) Small Business Watch(SM). At 99.2, the
Watch dipped for the first time below its baseline 100 mark, which was
established in August 2006.
However, owners' expectations that economic conditions for their
businesses will improve over the next six months are higher, and they
are planning to increase hiring and spend more on business
"For the last few months, we have seen a downward trend in small
business owners' confidence in the economy," said Sastry Rachakonda,
director of Discover's business credit card. "Cash flow constraints
are a very tangible sign that can move the index. On the other hand,
business owners' optimism may be a sign that they feel like things
will be turning around."
The 1,000 business owners polled in September showed a
4-percentage-point rise in their optimism that economic conditions for
their businesses will get better over the next six months. A third of
them, 36 percent, are planning to increase spending on business
September Key Findings:
- 46 percent of small business owners said that they have
experienced cash flow issues in the last 90 days, an increase
over last month's 41 percent and July's 35 percent.
- 40 percent of small business owners feel that economic
conditions for their businesses are getting better, an
increase over the 36 percent who said the same in August.
- The percentage of business owners who say they will spend more
on business development in the next six months rose from 34
percent in August to 36 percent in September.
- 15 percent of small business owners said that they would
likely hire more workers over the next few months,
representing an increase from August's 12 percent.
Business Owner Poll: 1 in 3 Depend on Credit to Run Their
Operations; Many Facing Delayed Payments
Nearly one third of small business owners said that they extend
credit to their customers, and of those, 64 percent said that their
customers who use credit had delayed a payment or asked to delay a
payment in the past three months.
"With their customers asking to delay payments, it makes sense
that many small business owners are feeling the tightening of cash
flow more in September," Rachakonda said.
The Watch also found that 30 percent of entrepreneurs borrowed
money to start their businesses. Of the borrowers, 36 percent used
Small Business Administration bank loans or other bank loan, 35
percent sought funds from friends and family, and 19 percent tapped a
home equity loan.
"While many used bank loans to seed their small businesses, 60
percent of small business owners said that banks do only a fair to
poor job of helping them get started," Rachakonda said.
General Poll: No Evidence of Credit Climate Hurting
- 29 percent of the 4,000 consumers polled in September said
they would like to start their own businesses someday, with 35
percent of those future entrepreneurs saying they were very
likely or somewhat likely do so in the next 12 months.
- People planning to launch enterprises in the next 12 months
also were confident that they would be able to borrow the
necessary funds; 61 percent said that it was very likely or
somewhat likely that they would be able to borrow the funds,
while 33 percent said that it was not very or not at all
likely they would be able to borrow; 6 percent were not sure
if they would be able to borrow.
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 employ
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 1,000 small business
owners. It is commissioned by the 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 of 2006. In
addition to generating the index, the Small Business Watch surveys
small business viewpoints on key business drivers, and also surveys
4,000 consumers to gauge purchasing behavior and attitudes towards
small businesses. For past results and small business survey data,
visit www.discoverbiz.com/watch. For information on Discover Business
Card, visit www.discoverbiz.com.
About Discover Financial Services
Discover Financial Services (NYSE:DFS) operates the Discover Card
with more than 50 million cardmembers, the Discover Network with
millions of merchant and cash access locations, and the Goldfish
credit card business in the United Kingdom. Discover Financial
Services also operates the PULSE ATM/debit network, which serves more
than 4,400 financial institutions and includes nearly 260,000 ATMs, as
well as POS terminals, nationwide. For more information, visit
CONTACT: Discover Financial Services
Robinson Lerer & Montgomery
SOURCE: Discover Financial Services