Small business confidence in the American economy rebounded in January as owners reported substantially fewer cash flow issues in surveys conducted for this month’s Discover® Small Business Watch (SM).  At 114.3, the Discover confidence measure returned to the level reported in November (114.6) and is nearly five points higher than December’s 109.7.

“There is a marked improvement in post-holiday optimism,” said Sastry Rachakonda, director of Discover’s small business credit card.  “It seems smaller businesses are in a better cash position, probably due to a combination of lower receivables and the absence of pressure on energy prices due to the unusually mild winter.”

January Key Findings:  

• The number of small business owners who said they experienced cash flow issues dropped from 42 percent in December to 32 percent in January.
  
• Thirty-five percent said economic conditions in the U.S. are getting better, up from 31 percent in December.  The percentage of owners who feel economic conditions are getting worse dropped to 46 percent, compared to 50 percent last month.
  
  Spotlight Poll: Health Care Concerns for Small Businesses

A recent survey of U.S. small business owners commissioned by Discover Business Card uncovered a series of pressures caused by soaring health care costs that threaten the country’s 22 million small businesses.

“The financial burden of rising health insurance costs puts an extreme amount of stress on this segment of the economy,” Rachakonda said. “Our survey shows that health care concerns may be stifling the entrepreneurial spirit in America.”

“We found that three out of four small business owners do not offer their employees health benefits and instead rely on their family members’ coverage or separately purchased plans,” Rachakonda said. “Nearly one out of every five small business owners has no insurance at all. If you can’t afford insurance or you can’t afford to offer it, how can you attract the talent you need to stay competitive?”

Prohibitive Costs Stifle Growth, Threaten Continued Coverage

• Sixty-four percent of small business owners say health care costs have an impact on their ability to grow their companies.

• Sixty-seven percent of owners express that it is “very difficult” (50 percent) or “somewhat difficult” (17 percent) to obtain affordable healthcare for themselves and their employees.  

• Thirty-three percent of small business owners who offer healthcare have considered discontinuing healthcare coverage for themselves or their employees due to high costs.  Seventy-four percent of all small business owners said that provide no health insurance to their employees. 

Limited Coverage Hinders Ability to Attract Employees    

• Close to three quarters of workers say that healthcare benefits are a “very important” (47 percent) or “somewhat important” (24 percent) factor when they are choosing a job, revealing that the small businesses without healthcare plans are at a significant human resource disadvantage.

Mandated Coverage Perceived to Hurt Small Businesses  

• Sixty percent of small business owners believe that a government mandate to provide healthcare coverage to employees would have a negative impact on their business. 

• While 46 percent of consumers say that the government should mandate that all small businesses provide health insurance, the majority of them believe that most or all the cost of that requirement would likely be passed along to them (90 percent).

“There are no easy answers to this complex problem,” Rachakonda said. “Small business owners are saying that healthcare costs clearly have an impact on their ability to grow.”

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 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. The Watch is commissioned by Discover Business Card, a credit card for U.S. small business owners which offers flexibility, control and the best cash rewards in its class. For information, visit www.discoverbiz.com.

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