Small Business Conditions Improving, Yet Concerns Remain, According to Capital One's Quarterly Spark Small Business Barometer

  Small Business Conditions Improving, Yet Concerns Remain, According to
  Capital One's Quarterly Spark Small Business Barometer

 Plans to Hire Remain Stagnant Despite Increased Sales and Optimism about the
                  Economy during the Second Quarter of 2013

Business Wire

MCLEAN, Va. -- June 17, 2013

Small businesses across the country are seeing improved financial conditions
and feeling optimistic about the months ahead, yet concerns about hiring and
growth remain, according to Capital One’s second quarter 2013 Spark Small
Business Barometer. This quarterly survey of small businesses across the
nation examines small business perceptions of the economic environment, and
gauges current financial conditions and business projections for the next six
months.

Following are the key trends derived from this quarter’s survey:

  *Financial optimism is on the rise: 45 percent of small businesses across
    the country are reporting that they believe their financial position will
    be better in six months, a seven-point increase from Q4 2012 (38 percent)
    and a two-point increase from Q2 2012 (43 percent).
  *Small business owners are financially better off than a year ago: 35
    percent of small businesses say their firm’s financial position is better
    than a year ago, compared with 18 percent who report that their financial
    position is worse – a significant improvement over Q4 2012, when a
    two-year high of 27 percent said their finances were worse.
  *Positive sentiment on local markets: 64 percent of small businesses are
    optimistic about the economies where they do business, but slightly less
    than half (48 percent) are optimistic about the state of the national
    economy.
  *Even in light of optimism, lack of plans to hire persists: 67 percent of
    small businesses do not have plans to hire in the next six months, a 1
    point decrease from Q4 2012 (68 percent), but seven points higher than Q2
    2012 (60 percent).

“Our survey results for the second quarter indicate that while optimism and
confidence are on the rise and more small businesses are on sound financial
footing, concerns and uncertainty continue to hold back plans for staffing
increases and growth,” said Jon Witter, President of Direct, Consumer and
Small Business Banking at Capital One. “While many small businesses have seen
an uptick in sales over the past six months, this is not necessarily
translating into significant new hires or investments in the business.”

More than half (52 percent) of small businesses across the country report that
current business conditions are fair or poor, while 46 percent report that
business conditions are excellent or good. While the majority of those
surveyed report that they are less than optimistic about current business
conditions, 35 percent of small businesses say their firm’s financial position
is better than a year ago, compared with 18 percent who report that their
financial position is worse. This is a significant nine point decrease from
the two-year high of small businesses that said their financial position was
worse in Q4 2012 (27 percent). This quarter’s results are on par with the
slow, but steady trend of business owners feeling better about their firm’s
financial shape and positive outlook about future prospects that has developed
since Capital One issued its first quarterly survey in Q1 2009.

Nearly half of small businesses across the country are reporting that they
believe their financial position will be better in six months (45 percent),
which could be attributed to the increase in sales that 35 percent of small
businesses saw during the past six months. This is a 7 point increase from Q4
2012 (38 percent) and a 2 percent increase from Q2 2012 (43 percent). This
quarter, only 10 percent of small businesses report that they think their
financial position will be worse in six months, a significant 10 point
decrease from Q4 2012 (20 percent), but a 2 percent increase from Q2 2012 (8
percent). Forty-one percent of small businesses report they believe their
financial positions will be about the same in six months.

The growing optimism small businesses are reporting this quarter was also
reflected in their responses about the state of the national economy and the
local economies where they do business. Slightly more small businesses across
the country are optimistic about the national economy (48 percent) compared to
46 percent who are pessimistic. Additionally, the majority of small businesses
(64 percent) are optimistic about the economies where they do businesses,
which bodes well for local businesses across the country.

However, the boost in confidence small businesses reported about the economy
and their future financial situations was not carried over when they were
asked about hiring plans. Most small businesses do not have plans to hire in
the next six months (67 percent), a 1 point decrease from Q4 2012 (68
percent), but a 7 point increase from Q2 2012 (60 percent). This continues the
conservative hiring trend the Spark Small Business Barometer has tracked since
2009. Over the course of the four years, 30-38 percent of respondents say
their firms have plans to hire additional employees in the coming six months,
while 55-70 percent say their firms do not. As shown this quarter, business
owners continue to be cautious about adding employees, likely still waiting to
see continued positive economic indicators and more regulatory and tax
certainty from Washington before fully committing to expansion.

Of the 30 percent of small businesses that did report plans to hire this
quarter, nearly three fourths (72 percent) anticipate hiring between 1-5 new
employees. Nearly 30 percent of small businesses report plans to hire military
veterans (28 percent) in the next six months, but only 18 percent have plans
to hire recent college graduates. Nearly 30 percent of small businesses report
that increased revenue/sales (29 percent) and replacing an employee who left
(29 percent) are the primary factors driving their decisions to hire.

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 1,906 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 April 24th – May
8th, 2013. All interviews were conducted by telephone at their places of
business. One respondent per business was contacted. The margin of error is ±
2.4 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 $212.4 billion in deposits and $300.2 billion in total
assets as of March 31, 2013. Headquartered in McLean, Virginia, Capital One
offers 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 more than 900 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.

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Contact:

Capital One
Alison Cahill, 917-653-7592
Alison.Cahill-Rouse@capitalone.com
 
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