Most small business owners still believe that it will be at least into 2010 before the economy recovers.
Ryan Scully, Director, Discover Business

After falling to its lowest measurement ever in November, economic confidence among small business owners rose slightly in December. The Discover Small Business Watch rose to 72.8 in December, up 5.3 points from November. The index was buoyed by increased optimism that their own business prospects are improving and an indication that more will increase spending on business development in the next six months.

"While we saw small improvements in economic confidence almost across the board this month, the mood still remains cautious," said Ryan Scully, director of Discover's business credit card. "Most small business owners still believe that it will be at least into 2010 before the economy recovers."

December Key Findings:

21 percent of small business owners believe that economic conditions for their businesses are getting better, up from 15 percent in November, which was the all-time low in the 29-month history of the Watch. Fifty-one percent feel the conditions are getting worse, which is down from 54 percent last month.

24 percent of owners say they plan to increase spending on business development over the next six months. This is an increase from 20 percent who said the same in November. Forty-seven percent say they are planning to decrease spending on business development compared to 51 percent last month.

Cash flow issues decreased slightly in December as 42 percent of owners say they held off paying some bills in the past 90 days. Forty-four percent said the same in November.

63 percent rate the economy as poor, down 2 percent from November; only 6 percent rate the economy excellent or good, the second-lowest rating in this category in the history of the Watch.

12 percent feel the economy is getting better, which is the highest in this category since August 2008. The number of small business owners who think the U.S. economy is getting worse decreased by two percentage points to 70 percent in December; and 14 percent think it is staying the same.

69% of Small Business Owners Think U.S. Recovery Will Take At Least 12 Months

As the new year approaches, small business owners remain cautious about the amount of time it will take the economy to crawl out of its slump. Forty-two percent of owners anticipate that economic recovery will take between 12 and 24 months, while 27 percent believe that it will take longer than 24 months. Twenty-three percent think that the recovery will take less than 12 months.

"Economic confidence has been declining for the past year, and small business owners continue to be resilient by doing whatever it takes, including not relying on credit and taking home less pay," Scully said. "It’s not surprising that they seem to be buckling down for a long recovery since more than half of them have been telling us the economy is getting worse every month for the past 22 months."

Government Bailout Support Mixed

Sixty-eight percent of small business owners say they do not expect that government bailout assistance to banks will help their businesses in the next six months.

Fifty-five percent of small business owners do not believe U.S. automakers deserve a chance to qualify for some form of federal bailout assistance, while 33 percent say they would support a bailout for automakers and 12 percent answered "not sure."

When it comes to themselves, 48 percent of small business owners say they should be entitled to federal bailout assistance, while 35 percent didn’t think small businesses deserved federal bailout help and 16 percent were not sure.

Decreased Sales Pose Biggest Threat

When asked where they have felt the most negative stress on their business operations in the past year, 30 percent said decreased sales; followed by 23 percent who cited higher operating costs; 17 percent said taxes; 7 percent said financing and credit, and 17 percent said their business has not been under stress in the past year.

It appears fewer small business owners are extending credit to their customers. In December, 25 percent said they extend credit, and 72 percent of those who extend credit say that they have customers who have delayed a payment or asked if they could delay a payment in the last three months. In September 2007, 30 percent of small business owners were extending credit to their customers and 64 percent had received delayed payments or requests to delay payments.

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.