Small-Firm Owners Still Waiting For Recovery

RIVERWOODS, ILL. (TheStreet) -- Small-business owners have yet to experience the recovery some experts are pointing to this year, according to results from Discover Financial's (DFS) Small Business Watch.

Three months into year, some small-business owners see the direction of the economy worsening and the climate for their businesses declining over the past two months.

Discover's monthly index, which gauges economic confidence, dropped to 86.5 in March, down from 90.2 in February.

More than half of those surveyed rated the economy as still in "poor" condition for the nineteenth consecutive month, up from 41% in February and the highest since September, according to Discover. Respondents who said the economy was improving fell to 27% from 34% in the prior month.

"Our surveys have shown that the economic events of the recent past have hit small businesses hard, and many are still struggling to sustain an individual recovery of their own," said Ryan Scully, director of Discover's business credit card. "Nearly a third of small-business owners told us they have contemplated going out of business sometime during the past two months, which is up from spring of 2008."

Discover's Small Business Watch measures the relative economic confidence of U.S. small-business owners with fewer than five employees. The survey, which polled a random sample of 750 business owners, is conducted by Rasmussen Reports, an independent survey research firm.

The segment consists of 22 million businesses producing more than a trillion dollars in annual receipts, Discover says.

More than three-quarters of the survey respondents answered that rising fuel prices have affected profitability.

Among those who have not experienced a comeback for their businesses from the recession, 14% said they may never recover.

Approximately 45% expect a recovery to take more than a year; 16% say they will recover in six to 12 months; 10% predict three to six months; and 7% percent are expecting a sustained recovery in the next three months. Only 1% said they were experiencing a recovery.

That being said, fewer business owners reported cash flow issues. Over the past 90 days, 52% reported no temporary cash flow issues affecting their ability to pay their bills on time, up from 46% last month. The number of business owners who did report cash flow issues fell to 43% from 50%, the survey said.

Also, 29% of small-business owners plan to increase spending on business development in the next six months, up slightly from the prior month, Discover said. Approximately 40% said they would decrease spending, down from 41%.

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