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Health Care, Financing Top Small-Business Concerns

Hema Oza

Of the survey's 500 participants, a total of 43% believe the economy is getting worse than it was five years ago, while 36% say the economy is getting better and 21% consider it to be about the same. When asked about their outlook for the economy, more than half of the owners surveyed say they anticipate a flat economy in the upcoming year, while 29% expect continued economic expansion and 14% are waiting for a recession.

"This really ties to the general unease about the national condition, as much as it is the economy per se," says Todd McCracken, president of the NSBA. "People seem just generally pessimistic."

McCracken believes the uncertain views illustrated in the survey are in line with what the American population at large thinks about the economic situation. However, in contrast with how people feel when looking at the actual facts, it seems the economy is doing much better on paper, he says.

"This leads me to believe that a lot of their negativity has to do with the political situation, the war in Iraq and other things that wind up coming out as worry about the economy," McCracken says. "But when you look at their own businesses, [small-business entrepreneurs] are doing pretty well."

More than 80% of the owners surveyed state they are confident about the future of their businesses. This, McCracken says, is a very good sign. Another promising find is the growing diversity of the small-business community in this country. "We're beginning to see increasing levels of small-business ownership by women and minorities and broader groups of the population."

Health Care and Financing Concerns

Besides economic uncertainty, a majority of entrepreneurs stated the cost of health care benefits and lack of available capital as the biggest challenges plaguing their businesses.

While McCracken says it's not surprising that the provision of health insurance for employees continues to decline among small companies, it does reaffirm that it is a very serious issue. He believes it has surprised many people that more than 70% of the small companies surveyed are in favor of supporting big reforms in the health-insurance market. However, at the same time, a majority do reject a federal mandate.

"Often small companies are seen as an obstacle to getting health care reforms," McCracken says. But "in fact, the survey showed pretty clearly that they would support reforms in the health care system by large majorities."

One of the most surprising and worrisome discoveries from the survey came from the financing section, McCracken continues, and finding that a lot fewer businesses have adequate access to financing. "At the same time, the percentage of companies that are carrying a balance, sometimes a fairly significant balance, on their credit cards for business purposes is up markedly," he notes.

While the number of businesses receiving adequate access to financing are not quite down "to levels that we saw during the credit crunch of the early 1990s, they are closer to that than what we've seen more recently," McCracken says. "It is a little bit disturbing that there could be something potentially threatening occurring in the world of small-business finance."

When companies say they don't have adequate financing overall, what that most likely means, he explains, is that owners can't grow their businesses as much as they would like.

Specifically, McCracken says, the credit-card element is disturbing because small businesses are almost certainly paying higher interest rates than they otherwise would through a traditional bank loan. This puts business owners at a high degree of risk, because a credit card can change its financing terms on loans at almost any time. "The credit card company can unilaterally decide that the money you borrowed six months ago at 9% today is 17%," McCracken says. "That's very risky for people."

Usually, increased financing challenges are not something most small-business owners fear, so this find is a bit surprising, he says.