Small businesses continue to show improvements, remain steady, but express concerns for remainder of the year, according to second quarter 2012 survey data

MCLEAN, Va.--(BUSINESS WIRE)--Aug. 21, 2012-- Small businesses across the country are reporting generally modest but steady improvement in their finances, according to Capital One’s second quarter 2012 Small Business Barometer, a quarterly survey of small businesses across the nation examining general economic indicators and small business perceptions of the economic environment, gauging current financial conditions and business projections for the next six months. Looking back over the past year, the survey results indicate that small businesses continue to show signs of improvement. Small businesses started the year off on more solid footing in the first quarter of 2012 and the initial gains over 2011 have remained consistent, even showing some improvement in the second quarter of the year. On the hiring front, the survey found a two-year high in the percentage of small businesses planning to add jobs over the next six month, with 37 percent reporting plans to hire.

The majority of small businesses report that their business financials have remained stable or improved, with 44 percent reporting improved financial position compared to one year ago. However, small business perceptions regarding local economic conditions remain relatively unchanged and, despite the improvement in company financials, the data shows small business owners are less optimistic about business prospects in the months ahead. The national business outlook indicates that concerns over sales and price margins, have diminished small business confidence in their prospects for the remainder of 2012.

“This quarter’s survey results suggest that business is generally holding steady for small businesses; the current economic environment and overall business performance continue to hold their own or improve, and while hiring is far short of pre-recession levels, we’re seeing small businesses making plans to hire new employees in numbers that are among the highest we’ve seen in the past two years,” said Jon Witter, President, Retail and Direct Banking at Capital One. “Though these are promising signs, as we look forward, we’re also seeing some hesitancy and concern about prospects for the remainder of the year, as well as a limited line of sight to growth – demonstrating small business owners are moving forward with continued caution and pragmatism as they consider their plans and projections for the coming months.”

Financial Performance and Spending

Economic conditions for small businesses nationally are holding steady. Nearly half (45 percent) of small businesses report that economic conditions for their business are about the same, a two-point increase from the previous quarter and one point lower than in the second quarter of 2011. More than a third (38 percent) of small businesses report improving economic conditions. This is one point lower than last quarter and six points lower than the two-year high of 44 percent last year (Q2 2011). While a majority of small businesses believe economic conditions are the same or improving, a sizable portion of small businesses (17 percent) believe economic conditions are getting worse.

The majority of small businesses are in a better financial position than last year. Forty-four percent of small businesses say their firm's financial position is better than a year ago. This is a two-point increase from the previous quarter, and higher than those who say that their position is about the same (40 percent). Only fifteen percent of small businesses say their financial position has gotten worse. This is two points lower than the previous quarter, but is still six points higher than the two-year low of 9 percent set in Q2 2011.

Economic Outlook and Business Pressures

Small business perceptions of the economic outlook for business prospects over the next six months show that owners are mildly optimistic. The national business outlook is a measure of business prospects over the next six months on a scale of significantly worse (1) to significantly better (10). Even though they are faced with favorable economic conditions and better financial performance, small businesses rate the national business outlook at 6.0 out of 10 points, 0.4 points lower than the 6.4 from the previous quarter. Conversely, all business indicators are having a larger impact on business prospects than last quarter. Price margins are expected to have the most impact on business prospects, also having the largest change since last quarter (0.7-point increase).

Hiring & Spending Outlook

Across the country, more small businesses are forecasting increases in hiring employees in the next six months. More than a third (37 percent) of small businesses plan to hire additional employees, a two-year high. This is two points higher than last year (Q2 2011) and three points higher than last quarter (Q1 2012). Difficulty in finding the right talent to fill available openings remains relatively consistent with last quarter. Sixteen percent of small businesses say they have job openings they are unable to fill, up one point from the previous quarter.

The majority of small businesses will keep spending, business development and investment consistent. Seven in ten of the country’s small businesses plan to keep spending at the same levels, the highest amount in the last two years. This is a nine-point increase from the previous quarter and five points higher than it was one year ago. This shift parallels the decrease of small businesses that plan to increase spending. Only 15 percent of small businesses forecast increasing business development and investment spending, 10 points lower than the previous quarter and 12 points lower than the two-year high of 27 percent one year ago.

Availability of Financing

In the second-quarter survey, a quarter of U.S. small businesses reported they have tried to obtain financing in the last 12 months. This figure, the highest it has been over the last nine quarters of survey data, is two points higher than the previous quarter and nine points higher than one year ago (Q2 2011). Among businesses seeking to obtain financing over the last twelve months, the manufacturing and construction sectors represent the highest percentage of those seeking the extra support. More than two-fifths (42%) of small businesses report that obtaining financing is harder than it was six months ago, a decrease of 10 points from the previous quarter. Less than one-in-ten (9 percent) of small businesses report that obtaining financing is easier than it was six months ago, a decrease of 5 points from the previous quarter.

Survey Methodology

The findings reported in this release are from a telephone survey conducted by the opinion research firm, Braun Research of Princeton, N.J. Braun Research interviewed a nationally-representative sample of 1,901 for-profit small businesses in the U.S., weighted to Dunn and Bradstreet counts of all businesses nationwide by employee size and geography. Samples were also taken in New York, New Jersey, Louisiana, Texas and the Washington, D.C. metropolitan area. Small businesses are defined as those with less than $10 million in annual revenue. The interviews were conducted from June 14 – 28, 2012. All interviews were conducted by telephone at their places of business. One respondent per business was contacted. The margin of error is ± 2.2 percentage points at the 95% confidence level. Interviews were monitored at random. Sampling for this study was conducted using a national sample of businesses drawn from InfoUSA. All interviews were conducted using a computer-assisted telephone interviewing system. Statistical weights were designed from the United States Department of Commerce to ensure proper inclusion of all SIC codes.

About Capital One

Capital One Financial Corporation (http://www.capitalone.com/) is a financial holding company whose subsidiaries, which include Capital One, N.A., Capital One Bank (USA), N. A., and ING Bank, fsb, had $213.9 billion in deposits and $296.6 billion in total assets outstanding as of June 30, 2012. Headquartered in McLean, Virginia, Capital One and ING DIRECT offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.

Source: Capital One Financial Corporation

Capital One Financial Corporation
Steve Schooff, 212-216-8984
steve.schooff@capitalone.com