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Capital One Bank's First Quarter 2011 Small Business Barometer Survey
Suggests Increased Optimism about Overall Economic Conditions

May 3, 2011 at 8:02 AM EDT
As Small Business Week approaches, business owners report that finances are improving, but they're not yet ready to hire

MCLEAN, Va., May 03, 2011 (BUSINESS WIRE) --

In recognition of the more than 27 million small businesses across the United States and the role they play in driving the nation's economy, the President has designated May 16-20 National Small Business Week. Capital One Small Business is marking this occasion with the release of its Small Business Barometer survey results for the first quarter of 2011. The quarterly survey polls small businesses across the nation, gauging their current financial condition and business projections for the next six months. Survey results for the first quarter of 2011 suggest that many U.S. small businesses are experiencing continued improvement in financial performance, which appears to be contributing to a measured, but increasingly optimistic view of the overall economy. Most small business owners and managers polled, however, continue to guard their spending in the near term. The survey results show that most small business leaders are still holding off on hiring or making additional investments in the business. However, for those businesses considering growth opportunities or for those simply managing ongoing cash flow, the first quarter survey indicates that credit availability continues to improve significantly and fewer small businesses report that they are experiencing cash flow issues.

"Our first quarter survey results suggest that many small businesses in the U.S. are on increasingly solid ground and, while we are still seeing businesses taking a cautious approach to spending and hiring, overall business conditions appear to be improving and their economic outlook has been growing more positive over the past two quarters," said Pete Appello, Executive Vice President of Small Business Banking at Capital One. "We will continue to watch hiring and spending plans carefully in the months to come, nevertheless, it is an encouraging sign that most businesses believe credit and financing is available to them when needed. This will allow small businesses to take advantage of growth opportunities when they are ready."

Outlook and Financial Performance

The survey results for the first quarter of 2011 suggest that U.S. small businesses are increasingly optimistic about overall economic conditions and most businesses polled continue to feel confident that 2011 business performance will be better than it was in 2010. Additionally, an increased percentage of small businesses report that their financial position is stronger than it was one year ago and fewer businesses report that their finances have deteriorated over the same period.

  • In the first quarter, 41 percent of small businesses polled believe that economic conditions for their business are improving. This number has increased a total of 15 percentage points since the fourth quarter of 2010. The percentage of small businesses reporting that conditions are getting worse fell 7 percentage points since the fourth quarter of last year to 11 percent, the lowest level reported since the survey began in the first quarter of 2010.
  • Sixty-one percent of U.S. small businesses surveyed expect their business performance in 2011 will be stronger than it was in 2010. Respondents suggest that their confidence has moderated somewhat as the percentage predicting "much better" performance in 2011 fell 6 percentage points compared to fourth quarter 2010 results, but the percentage of small businesses forecasting "somewhat better" performance ticked up 10 percentage points.
  • More than four-in-ten (43 percent) of small business owners polled report that their firm's financial position is better than it was one year ago, up six percentage points from the fourth quarter of 2010 and 13 percentage points higher than in the third quarter of 2010. Forty-six percent of small businesses surveyed indicate their firm's financial position has held steady relative to one year ago. Only 10 percent of small businesses report that their financial position has worsened over the past year, down from 18 percent in the fourth quarter of 2010. This is the smallest percentage of small businesses reporting a deteriorated financial position since the survey began one year ago.

Spending and Hiring

Most U.S. small businesses polled continue to hold off on hiring and plan to keep spending on business development and investments at current levels in the near term. These results have been relatively unchanged over the past year.

  • Slightly less than one-third (29 percent) of small businesses polled in the first quarter of 2011 plan to add employees to the payroll over the next six months. This number is consistent with previous results over the past year.
  • Consistent with results from the fourth quarter of 2010, only about one-quarter (23 percent) of U.S. small businesses polled say they plan to increase spending on business development or investments during the next six months. Most small businesses surveyed (67 percent) plan to keep spending at current levels in the near-term.

Availability of Financing

The survey results suggest that the availability of credit and financing for small businesses continues to grow and fulfilling capital needs is becoming less of a concern for small businesses.

  • Eighty-five percent of U.S. small businesses surveyed report that they are able to access the financing they need, an increase of seven percentage points from the fourth quarter of 2010 and 15 percentage points higher on a year-over-year basis.
  • Only 14 percent of small businesses polled report that they are having cash flow issues, down from 18 percent in the fourth quarter of 2010.
  • Only 13 percent of small businesses in the survey say that securing the capital needed to continue operations will be one of the biggest challenges they face over the next six months, down 16 percentage points from the same quarter in 2010.

Marketing Strategy

Capital One also asked local businesses about their marketing strategy, including their use of new media. Key findings include:

  • Newspaper and other print ads are the most popular marketing tool among our small business sample, with 62 percent investing in this type of marketing.
  • One-third (34 percent) of small businesses are currently using online ads to market their business.
  • Fourteen percent of U.S. small businesses say they market through Facebook and/or Twitter and five percent use social couponing like Groupon or Living Social. Only three percent of respondents write a company blog and 2 percent are currently making use of location-based mobile applications like FourSquare to market their business.
  • Twenty percent of small businesses market through radio and about the same percentage (19 percent) use TV.
  • Traditional networking is also a popular marketing tool among small business owners - 51 percent of businesses polled currently use this tactic to market their business.

Anticipated Business Pressures

Capital One polled small businesses about the pressures they anticipate on their business over the next six months. The survey found that activity from competitors and rising fuel costs are key concerns for many U.S. small businesses.

  • Thirty percent of respondents believe activity from competitors will place "quite a lot" or "extreme" pressure on their business during the next six months.
  • One-quarter (25 percent) of small businesses surveyed say they expect fuel prices will place "extreme" or "quite a lot" of pressure on their business over the next six months.
  • Twenty-one percent of respondents believe that price margins and profitability will place "quite a lot" or "extreme" pressure on their business in the near term.
  • Small businesses are much less concerned about pressure from cash flow issues, interest rates and timing of customer payments.

Survey Methodology

The findings reported in this release are from a telephone survey conducted by the opinion research firm, Braun Research of Princeton, NJ. Braun Research interviewed a nationally-representative sample of 1,903 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 March 11-29, 2011. All interviews were conducted by telephone at their places of business. One respondent per business was contacted. The margin of error is ± 2.3 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 (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A. and Capital One Bank (USA), N. A., had $125.4 billion in deposits and $199.3 billion in total assets outstanding as of March 31, 2011. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in Texas, Louisiana, 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