Small Firms Remain Optimistic, but Recession Looms

Most small businesses say the nation's state of economic uncertainty and lack of health insurance and available capital are the most significant challenges they face in growing and maintaining their businesses.

The National Small Business Association released a study today that covers a broad range of business owners' opinions on topics ranging from employee benefits to energy costs.

Nearly half of all respondents said they expect a recession to occur within the next year while nine percent anticipated economic expansion.

"Small businesses are buckling down, with nearly a quarter reporting no growth strategies planned for the coming year," said association chairwoman Marilyn Landis, who plans to discuss the data at a hearing this afternoon before the Senate Small Business and Entrepreneurship Committee.

More than half of the business owners surveyed said they have faced difficulty securing credit during the last year. Credit cards continue to be the largest primary source of financing for small firms even though 57 percent report that their credit card terms are worsening.

Fifty-four percent of small businesses have some type of business loan, according to the survey; and to leverage those loans business owners are using credit cards, personal savings and their homes as primary sources of financing.

Small business owners also said spikes in energy costs have forced them to increase prices, reduce business travel, cut production schedules and reduce their workforces. On the up side, 18 percent of those surveyed said they're investing in more energy efficient equipment or upgrades.

Despite the gloom and doom, the majority of those surveyed still expressed confidence for their own businesses. Glen Bolger of Public Opinion Strategies, which conducted the survey of 500 firms for the NSBA, said the optimism tracks closely with what his group would expect to see from self-starting entrepreneurs.

But the confidence is unevenly spread among the smallest businesses and their slightly larger neighbors. Seventy percent of all business owners said they were confident in the future of their business, compared to last year's 81 percent, but only 64 percent of firms with four or fewer employees expressed confidence in their future.

Small Business Readers: What do you think are the most pressing issues for small businesses to grow or survive?

By Sharon McLoone |  April 16, 2008; 10:04 AM ET Data Points
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