Small Business Confidence Rebounds in January; Healthcare Costs Weigh

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 health care for themselves and their employees.
• Thirty-three percent of small business owners who offer health care have considered discontinuing health-care 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 health-care 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 health-care 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 health-care 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 health-care costs clearly have an impact on their ability to grow."