trend survey my 2011(v3)

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011 Mid-Year Economic Report


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011 Mid-Year Economic Report 2 National Small Business Associatio

Methodologyhe 2011 Mid-Year Economic Report

was conducted on-line June 24hrough July 11, 2011 among 400mall-business members of NSBAepresenting every industry in everytate in the nation. While the results in

his survey can be extrapolated to thet-large small-business community,

is worth mentioning that NSBAmembers tend to be older, more well-stablished small businesses.

Since 1937, NSBA has been the nationseading small-business advocate. As part ofSBAs mission to address the needs andepresent the concerns of the small-businessommunity, we conduct a series of surveysnd quick polls throughout the year. Among

hose are the two NSBA Economic Reports.he Mid-Year Economic Report, released late-uly, and Year-End Economic Report, releasedte-January, use NSBA survey data to providesnapshot of how small businesses are

ealing with the current economic situation.he 2011 Mid-Year Economic Report showshat small-business owners are feeling slightlyess optimistic about the outlook of their ownrms and are increasingly concerned abouthe overall U.S. economy.

Although just six months ago optimismppeared to rebound following the somewhat

egative 2010 Mid-Year Economic Report,mall businesses once again nd themselvesacing a likely economic slump. The numberf small-business owners88 percentnticipating a at or recessionary economy ist its highest point since July 2009. There also

was a signicant increase in small-businesswners who believe the economy is worse offoday than it was just six months ago.

As is to be expected from entrepreneursnd small-business ownerswho generallyre more optimistic about their ownusinesses than they are about the overallconomythere has been limited, positive

movement in terms of past and projected

employment. Although still registering anoverall net decrease in employment for thepast 12 months, small businesses reportedthe lowest net decreases in employment inthree years. When asked in December 2010how their number of employees changed over

the last 12 months, there was a 15 percentnet decrease. In July 2011, there was a fourpercent net decrease. Similarly, when askedto project employment growth in the coming12 months, there was an increase from 13percent net projected employment growthsix months ago to 17 percent net projectedemployment growth today.

Unfortunately, another key indicator,past and projected revenues, didnt fare aswell. Revenue projections for the coming12 months dipped slightly from net revenuegrowth of 35 percent in Dec. 2010 to just 29

percent today. There was a slight decreasedown from 66 percent to 64 percentin thenumber of small-business owners who feelcondent about the future of their business. Additionally, when asked to estimate whenthey expect to see growth opportunities fortheir business, 40 percent said they expectno such opportunities in the coming year.

One of the growing concerns of smallbusinesses is the national debt. Whenasked to rank their top three concerns,30 percent of small-business ownerspicked the decit, which came in fth,after economic uncertainty, declines incustomer spending, health insurance costs

and regulatory burdens.Financing also continues to be an

for a signicant number of small businewith 36 percent reporting an inabilitgarner adequate nancing. Credit cappear to be growing in cost with a j

from 13 percent to 19 percent of sbusiness owners who pay an interestthat is 20 percent or higher.

The cost of health care continues tan issue with 44 percent of small-busowners who provide health insurexperiencing a premium increase opercent or more. These costs are coto a breaking point where employers fewer and fewer benet design optionsare increasingly forced to make difemployment decisions as a result. Twas a notable jump in the number of s

business ownersup to 32 percent 24 percentwho reported they haveoff on hiring a new employee due to hcare costs. There also was an increathose who reported they were forced toff an employee due to health care co

When it comes to policy, small-busowners reacted with increasing concethe growing U.S. debt and rated redthe national decit the number one prfor Congress and the administratioaddress. Small-business owners condand outlook appears to be inuenced byconcern over the decit and the ongoingof a long-term solution.

When asked to estimate when they expect to see groopportunities for their business, 40 percent said the

expect no such opportunities in the coming year.

Started in 1937, NSBA is the nations oldest small-buadvocacy group representing employers in every statestrictly nonpartisan organization, NSBA reaches more150,000 employers in all sectors and industries of theconomy from retail to trade to technology. Our meare as diverse as the economy that they fuel. NSBAs positions and priorities are formulated through rvolunteer leadership and member participation, anreective of our nations 29.6 million small businesses


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011 Mid-Year Economic Report 3 National Small Business Associ

hinking about the next 12 months, do you anticipate:Small Business CondenceThe majority of small-business owners (58 perexpect a at U.S. economy in the coming Perhaps more alarming is the fact that the nuof small businesses expecting a recession moredoubled in the last six months from 13 perceDecember 2010 to 30 percent today. Correspondthe number of small-business owners anticipeconomic expansion dropped from 22 percent percent, the lowest level reported since July 2

Small-business owners were asked their opiof the overall U.S. economy today, as compar

six months ago, one year ago and ve yearsCompared to the national economy six months20 percent said that todays national econombetter, 47 percent said it is worse and 33 pesaid it is doing about the same. This represenotable deterioration from the past two surWhen compared with one year ago, 52 percentthe national economy today it is worse, 24 pesaid it was better, and 25 percent said it is about the same which mirrors the growing negasurrounding todays economy.

The overwhelming majority (72 percent) saidtodays national economy is worse off than it wa

years ago. Given the ongoing economic difcultieU.S. has faced the past three years, small-busowners overwhelmingly cited economic uncertainthe most signicant challenge to the future growtsurvival of their business. According to the July survey, 68 percent cited economic uncertainty anumber one challenge facing their business, folby decline in consumer spending (40 percent),of health insurance benets (33 percent), reguburdens (31 percent), the growing national (30 percent), federal taxes (22 percent), and laavailable capital (22 percent). The number of businesses selecting the growing federal debt incremarkedly from 19 percent in December 2010.

In keeping with the nature of being an entreprethe majority of small-business owners (64 perreported feeling condent about the fututheir rms. This means that more than one-of small-business owners are not condent ifuture of their own business.

NSBA reported in its 2010 Year-End Econreport that small-business condence appearbe turning , but warned that these modest forward in condence and business growth snot be taken as an indication that the U.S. ecohad fully recovered. As this report demonst

the small-business community still is struggling

Dec. 09

Dec. 09

July 10

July 10

Dec. 10

Dec. 10 July 11

July 11July 09

July 09

Dec. 08

Dec. 08

Aug. 08

Aug. 08

om a financial perspective, how do you feel right nowbout the future for your business?

CONFIDENT

%

62%66%

58%61% 59%

NOT CONFIDENT

25%

38%34%

42%39%41%

When comparing todays economy, would you sayhe national economy is:

A RECESSION

64%

6%

42%

21%

29%

13%

30%

12%

58%

A FLAT ECONOMY

53%

33%

63%59%

51%

65%

ECONOMIC EXPANSION

21%

3%

7%16% 13%22%

64%

36%

etter Off Better OffWorse Off Worse OffAbout The Same About The Same

24%20%

52%

47%

25%

33%

28% 27%

44%

29%28%

43%

%

27%

42%

31%

23%

42%

July 10

SIX MONTHS AGO ONE YEAR AGO

Dec. 10 July 11


4/15


The 2011 Mid-Year Economic survey took a clo

look at how small businesses fared over the p

12 months. Small-business owners were asked h

much change their businesses had experienced

gross sales/revenues and net profits, and the resu

show a continuation of the trending positive ga

in revenuesif at a somewhat more modest paProfits, on the other hand, experienced a hicc

with a drop in the number of small businesses t

experienced gains in profit.

There was no change in the number of sm

businesses (39 percent) reporting an increase

revenues from the December 2010 survey. Th

was, however, a notable decline in those report

decreases in revenue from 43 percent in Decem

2010 to 37 percent today. This slowing of dro

in revenue amounted to a very slight net incre

(two percent) in revenues and represents the f

time in three years that revenues have show

net positive.

Unfortunately, prots did

see such an increase. Th

two percent of busines

reported increases

protsdown from

percent in Decem2010. The num

of small busines

reporting decrease

prots remained

46 percent result

in a net 14 perc

decrease in prot

Past Business Growth

No change

Total Decrease

Total Increase

22%

16%

48%

53%

62%

43%

64%

37%

30%

21%

22%

26%

39%

39%

14%

21%

18%

24%

38%

45%

17%

hanges in gross sales/revenues over the last 12 months:

The slowing in revenue decreasesresulted in positive net revenue

gains for the rst time inthree years.

Dec. 09July 10 July 11Dec. 10

July 09Dec. 08Aug. 08

Do you believe there will be growth opportunities for yourbusiness in the coming year?

Yes 40% 45% 47% 52%No 45% 40% 44% 51%My business is already growing 15% 15% 9% 7%

July 11 Dec. 10 July 10 Dec. 09


5/15


Small-business owners also were asked to rate their

of expected business growth for the coming 12 m

Unfortunately, the positive projected gains reported in Dec

2010, when a majority of respondents (54 percent) pro

an increase in revenues, did not persist. Forty-nine perc

small businesses reported projected revenue growth f

coming 12 months, which is still notably higher than proje

throughout 2009 and most of 2010. Those projecting re

decreases held steady at 19 percent, resulting in over

gains in revenue projections of 29 percent.

There were similar set-backs in the number of small busin

projecting prot gains. Forty-three percent of small busin

projected prot increases, down from 44 percent in Dec

2010. Those projecting decreases in prot increased fro

percent to 26 percent. Both changes are minor and still re

an 18 percent net gain in projected prots.

Since 1993 when NSBA began asking these questions,

businesses have projected net increases in both revenue

prots. However, beginning in December 2008, both ind

showed net decreases. In December 2009, revenue proje

actually resulted in net gains, but prot remained a net dec

Today, both indicators are back on the side of net positiv

When asked about which future growth strategies they p

implement in the coming 12 months, the top four resp

were: new advertising and marketing strategies (43 per

expanded Internet presence and e-commerce (36 per

and strategic alliances (26 percent). Unfortunately, no g

strategies planned came in at fourth with 24 percent. H

new employee garnered 21 percent.

The timing of growth is another important component

survey. Forty percent of small-business owners said they

growth opportunities in the coming year. Unfortunately,

have been continued drops since December 2009 wh

percent projected some kind of growth in the coming yea

six months ago, 45 percent said they anticipate growth coming year. Among the 40 percent anticipating growth

coming year, six percent expect growth opportunities

next three months, nine percent expect growth opportun

three to six months, and 26 percent project growth opport

in six to twelve months. Fifteen percentunchanged

December 2010report that their business already is gr

An increasing number of entrepreneurs (45 percent)

believe there will be any growth opportunities for their bu

in the coming year.

Projected Business Growth

tal increase

anges expected in gross sales/revenueser the next 12 months:

o change

tal Decrease

tal Increase

30%

20%

57%

21%

43%

44%

54%

49%

26%

31%

32%

27%

31%

22%

50%

23%

31%

25%

19%

19%

47%

hich of the following growth strategies will you use ine next 12 months? (Please check all that apply)

Unfortunately, 45 percent do

not believe there will be any

growth opportunities for their

business in the coming year.



July 11 Dec. 10 July 10

ew advertising and marketingrategies

43% 42% 37%

ternet / Expand E-commerce 36% 34% 34%

rategic alliance 26% 24% 30%

o growth strategies will beed in the next 12 months

24% 24% 22%

re new employees 21% 20% 14%

int Venture 15% 13% 14%

vestments in R&D 14% 11% 11%

ther 11% 11% 7%

xpand operations to newcilities/add additional stores

10% 8% 7%

uisition 7% 8% 8%

utsourcing 9% 7% 10%

erger 5% 3% 5%


6/15


7/15


Over the past two years, job growth projections

fluctuated markedly. In July 2009, 13 percent of sm

business owners projected employment increase

December 2009, 24 percent projected increases

July 2010 22 percent did so, and in December 201

percent projected increases. Today, 29 percent of sm

business owners are projecting employment increas

the coming 12 months. Since July 2009, projected

growth has made a steady climb from net decreas

16 percent to todays net increase of 17 percent.

There also was positive movement among s

business owners who project no change whatsoev

employment. Although stil l the majority, small busine

that project no employment growth in the coming

dropped from an all-time high of 64 percent in Decem

2010 to 60 percent today. Given the historic role s

business has played in job creation, this stagn

underscores the strong need to support small-bus

growth and ensure impediments, such as an inabili

finance growth, are removed. Creating an environm

where small businesses can start, thrive and grow

enable the U.S. to continue more promptly toward la

economic recovery.

Projected Job Growthhanges expected to the number of employees overe next 12 months:

The number of small-business owners projecting nchange in employment has dropped slightly from itthree-year high of 64 percent just six months ago

down to 60 percent today.

o change

otal Decrease

otal Increase

13%

58%

30%

56%

24%

22%

25%

29%

58%

61%

64%

60%

18%

56%

29%

14%

18%17%

11%

12%

26%




8/15


mall-Business FinancingNSBA repeatedly has warned over the last three years, small-business

cess to capital is a signicant problem. There does appear, however, toa slight easing of credit among respondents. When asked what are the

ost signicant challenges facing their business, 22 percent said lack ofailable capitaldown from 26 percent in December 2011 and 29 percentJuly 2010.

e prospect of getting nanced for a small businesseven in a growingonomyis very difcult simply due to the fact that many small businessesk the assets necessary for a traditional bank loan, making them a riskier

nding option for banks. Over the last three years, the number of smallsinesses able to obtain adequate nancing for their business had steadilycreased. That trend, however, came to a halt in December 2010.

day, the number of small-business owners who report being able totain adequate nancing for their business remains unchanged frommonths ago at 64 percent. That number is up from just 59 percent

e year ago in July 2010the lowest it had been since NSBA beganking this question back in 1993. The fact that access to nancing did notteriorate is a positive step, but lending remains an issue. The long termerage is 68 percent of small businesses who are able to obtain adequateancing. It is worth noting that more than one-third (36 percent)whichuld translate into more than 10 millionof the nations small businessese not able to get adequate nancing.

SBA has been asking small-business owners if their business had beengatively impacted by the credit crunch since early 2008. In February

hat types of financing has your company used within thest 12 months to meet your capital needs?

mall-business

wners reporting

ng impacted by

e credit-crunch.

2008, 55 percent responded that it had. In Augusthat number jumped to 67 percent, and continued to69 percent in December 2008 and hit a peak of 80 pin July 2009. Despite a slight easing in Decembedown to 78 percent, the number skyrocketed in Julto its highest point of 80 percent and then recededown to 75 percent in December 2010, its lowest ptwo years. Today, that number continues to drop wpercent of small-business owners reporting their buhad been impacted by the credit crunch.

The availability of capital is a critical component to bugrowth and job creation for small businesses. Sincebegan asking these questions back in 1993, there hasdirect correlation between access to capital and job grwhen capital ows more freely, small businesses adjobs. Today is no different: over the past 12 monthsbusinesses reported a ve-point increase in emplowhile during that same time there was an 11-point inamong small businesses who reported being able to adequate nancing for their business.

Among small-business owners for whom capital avahas been a problem, 36 percent state that they hav

unable to grow or expand the business, down frpercent in December 2010. Eighteen percent state thhave been forced to reduce their number of empdown from 24 percent. Of particular concern was thnumbers of small businesses who reported being to increase inventory to meet demand (10 percenthose unable to nance increased sales (18 percentmeans that, although growth opportunities exist fobusinesses, they are being held back by a lack of A substantial number of small businesses were foreduce employee benets as a result of their inabgarner nancing.

In the last six months, there was an increase in small-buse of bank loans (up from 45 percent to 49 percent,cards (up from 36 percent to 37 percent,) private loafrom 15 percent to 21 percent,) and vendor credit (u23 percent to 25 percent.) The number of small bususing no nancing options also increased slightly frpercent to 23 percent. These increases likely meawhile there are fewer businesses using nancing, thodo are using more options for nancing.

Prior to the December 2009 survey, credit cards hathe number one source of nancing for small-buowners, Today, however, they have dropped to the nthree slot, just behind traditional bank loans at numb

and earnings of the business at number two.

In the July 2011 survey, small-business ownersasked to estimate their total small-business relatetoday, two years ago and ve years ago. Five yea70 percent of small-business owners reported cany small-business debt. That increased to 75 perceyears ago and is up at 78 percent today. Interestingaverage amount of debt reported ve years ago whighest at $1.504 million. Two years ago, the averagwas $1.049 million and today it is $1.108 million.

LoansThe number of small businesses relying on traditionaloans increased to 49 percent, which is the highest

78%80% 80%

75%73%

69%68%

Dec. 09 July 10 Dec. 10 July 11July 09Dec. 08Aug. 08

July11

Dec.10

July10

Dec.09

July09

Dec.08

Aug.08

ank loan 49% 45% 43% 46% 53% 44% 50%

arnings of the

usiness

43% 45% 42% 43% 43% 51% 49%

edit cards 37% 36% 39% 41% 43% 49% 41%

ndor credit 25% 23% 20% 24% 29% 27% 22%

sed no nancing 23% 21% 21% 21% 16% 22% 17%

ivate loanriends or family)

21% 15% 19% 18% 20% 16% 12%

asing 10% 9% 10% 8% 9% 8% 9%

therlease specify)

5% 7% 7% 7% 6% 8% 8%

mall Businessdministration loan

4% 4% 4% 4% 4% 3% 5%

elling/pledgingcounts receivable 4% 4% 3% 3% 3% 3% 2%

ivate placementdebt

2% 2% 4% 2% 3% 4% 2%


9/15


en in two years. The fact that fewer businesses relied onrnings of the business is a likely indicator that businessesve few other options for those looking for nancing.

wenty-one percent of small-business owners reporteds favorable terms on their loans in the last year, and onlyven percent report that the terms of their loans havecome more favorable.

derscoring this very slight thawing, the most recentderal Reserve Senior Loan Ofcer Opinion Survey (April11) found that only four percent of large banksdownm October 2010s reported 13 percenteased their

nding standards for small-businesses. This was the rstme lending standards had eased since late 2006. Among

banks, seven percent reported easing lending standardsr small rms. That same survey showed that 3.8 percentall banks actually lowered the size of credit lines but 27rcent eased the cost of credit lines for small rms, makingem more affordable. There still exists a huge discrepancytween large and small companies, however. Thirty-sixrcent of all banks report easing the cost of credit linesr large rmssignicantly more than those who did theme for small business.

e implications of the collapsed housing market continue to

unt the small-business community. Nearly one in ve (19rcent) small businesses report leveraging their businessans with a second mortgage. In addition to using a secondortgage, small-business owners also use business savings0 percent,) personal savings (36 percent,) accountsceivable (33 percent,) and credit cards (33 percent) toverage their business loans.

redit Cardsthe last year, credit card interest rates have increased for

mall businesses. There was a six point jump from 13 percent19 percent of businesses who pay 20 percent or more in

edit card interest rates. Furthermore, 41 percent of smallsinesses report being forced to pay an average intereste of 15 percent or more, and the overall average intereste charged on small-business cards is 15 percent.

spite this increase and the fact that 60 percentup frompercent just six months agoreport worsening credit

rd terms, there was a small increase in small-businessage of credit cards from 36 percent in December 2010 topercent today. Given the ongoing difculty small-business

wners experience garnering other types of nancing, ande increased targeting of small businesses by credit cardmpanies, this is not surprising.

cording to a May report from the Pew Charitable Trusts

ew), since enactment of the NSBA-supported Credit CARDt of 2009, solicitations for business credit cards accountedfour percent of all direct-mail credit-card offersup froms than two percent in 2006. The Pew study also foundge spikes between 2008 and 2009 when business creditrd solicitations comprised between 10 and 20 percent ofect mail credit card offers.

hough NSBA was strongly supportive of the Credit CARDt., Congress failed to include language to specically protect

mall-business cards, and they therefore do not carry any ofe protections contained in the law.

cording to the Pew study, 80 percent of business credit

rds are saddled with an any time change clause

Is your business able to obtain adequate financing

What is the approximate interest rate you are chargyour primary credit card?

Yes No

61%59%

64% 64%

39%41%36%

62%

38%

67%

33%

78%

22%

Dec. 09 July 10 Dec. 10 July 1July 09Dec. 08Aug. 08

which includes the right to retroactively increase interest rates on exbalanceswith no right to opt out, something the Credit CARD Actproon consumer credit cards. The study also found that penalty fees for bucredit cards are virtually unrestricted, and a whopping 41 percent of business credit cardholders pay an annual fee compared to only 14 pof consumer cardholders.

One particularly problematic trend that began in late-2008 was ccard companies arbitrarily reducing the credit limit on a cardor shdown the card entirely. For a small-business owner carrying a balancunexpected reduction results in a diminished credit score, as the osuddenly is utilizing more of his/her available credit. With banks increareliant on personal credit scores in their underwriting practices, this score hit can be quite problematic.

When asked in December 2008, 28 percent of small-business owners respthat they had experienced a decrease in their line(s) of credit or a credilimit in the past six months. In July 2010, that number had increased percent. Today, 24 percent of small-business owners report being subjto such a decrease in the last six months. Although this represents movin the right direction, the fact that one-fourth of small-business owne

having this critical credit source reduced is problematic.

July 11 Dec. 10 July 10 Dec. 09

Less than 10 22% 30% 13% 14%

10 to 15 33% 33% 37% 33%

15 to 19 22% 24% 27% 28%20 and more 19% 13% 23% 25%

Do you accept credit or debit card payments for yourgoods and/or services?

55%54% 53%

45% 46%

47%

July 11 Dec. 10 July 10

July 11 Dec


10/15


ublic Policymong the issues small-business owners ranked as top

ues for Congress and the administration to address were

ducing the national decit (34 percent,) reducing tax burden

6 percent,) reigning in the costs of health care reform

3 percent,) reducing the regulatory burden (13 percent,)

d increasing access to capital for small businesses (13

rcent.)

ational Defcit

ere was a signicant increase over the last six monthsmong small-business owners who rated reduce the

tional decit as their number one priority for policymakers

address. In December 2010, 23 percent rated it the top

ue, and today 34 percent ranked it at the top of their list.

e ongoing debate and lack of a clear, long-term solution

s added dramatically to small-business owners concerns

d has contributed to the relatively negative outlook for the

erall U.S. economy. Nearly one in three (30 percent) small-

siness owners said the growing national debt was among

e top ve challenges facing the future growth and survival

their businessup from just 19 percent six months ago.

mong the top rated xes for the national decit, small

sinesses supported: reform and reduce entitlement

ending (72 percent,) signicant cuts for certain federal

encies (62 percent,) an across the board budget cut

6 percent,) eliminate all credits and deductions with a

nicantly lower income tax (36 percent,) and eliminate

rtain tax credits and deductionseven those which may

net my business (26 percent.)

early 2011, NSBAs members voted decit reduction

mong the top ten priorities for the organization in the

ming two years. In the ensuing months, NSBA has called

policymakers to embrace a two-pronged approach todressing the decit: tax reform and entitlement reform.

axesoadening the tax base by lowering all individual and

rporate tax rates and eliminating certain deductions will

ur economic growth and lead to increased tax revenues.

rthermore, the growing cost of entitlement programs such

Social Security and Medicare weighs heavily on small

sinesses.

mall business consistently ranks reducing the tax burden

mong their top issues for Congress and the administration

address. In the most recent survey, small businesses

aced tax reform second only to the national decit in terms

policy initiatives lawmakers ought to pursue.

the context of decit reduction, various lawmakers have

ered proposals to ease the corporate tax rate. However the

rporate tax rate is just one small piece of the equation

e overwhelming majority of small businesses are pass-

rough entities and therefore pay business taxes through

eir individual income tax. Allowing the smallest businesses

pay a much higher tax on their business income than

ultinational, multi-billion corporations undercuts any

mblance of fairness.

Which one of the following issues do yobelieve Congress and President Obamasadministration should address first?

July 11 Dec

Reduce the national decit 34% 23%

Reducing the tax burden 16% 19%

Reign-in costs of health care reform 13% 17%

Reducing the regulatory burden on businesses 13% 17%

Increase small business access to capital 13% 15%

Which of the following deficit-reducing

proposals would you support?(Check all that apply)

July 11 De

Reform and reduce entitlement spending 72% 70%

Signicant cuts for certain federal agencies andprograms

62% n/a

An across-the-board budget cut for federal agencies 56% 70%

Eliminate all tax credits and deductions inconjunction with dramatically lower income tax rates

36% 40%

Eliminate certain tax credits and deductionseven

those which may benet my business

26% 24%

Greater authority of the administration to reduceCongressionally-approved spending

24% 29%

In the most recent survey, smbusinesses placed tax reform

second only to the national dein terms of policy initiatives

lawmakers ought to pursue.


11/15


If capital availability is a problem for yourbusiness, what is the effect on your operations?

ealth Carence the passage of the health care reform lawlegislation

hich NSBA ultimately opposed due to its inability to

uly address rising costssmall-business owners have

xpressed signicant confusion about how the new health

are law will impact their business. Today, however, there

ppears to be a slight increase in their understanding of

e new law.

neteen percent of small businessesup from 15 percentDecember 2010said they have a clear understanding

f how the new law will impact their business. Meanwhile,

3 percent, up from 53 percent, said they have a limited

nderstanding and 18 percent, down from 32 percent, said

ey do not understand at all how their business will be

mpacted.

When askedif their business is eligible for the small-

usiness health care tax credithow much the credit

ill help their business, the most common response (35

ercent) was that they were unsure if they qualify. This

dicator was down from six months ago, however, when

3 percent said they were not sure if they qualify. Twenty-wo percent responded that they do not qualify and the

maining 43 percent who are eligible reported mixed

vels of assistance from the credit. Among those that said

ey are eligible, only four percent said the credit will help

eir business signicantly, seven percent said it will help

oderately, 13 percent said it will help just a little and 19

ercent said it will not help at all.

mall businesses also continue to report dire consequences

f rising health insurance costs. When asked how the

ost of their health insurance had changed since the law

assed, 44 percent reported increases of more than 11

ercent, among those, 15 percent experienced an increase

excess of 20 percent.

o address these costs, small businesses have implemented

e following changes: 50 percent increased the deductible,

0 percent held off on employee compensation increases,

6 percent increased the employee share of the premium,

2 percent reduced employee benets, 28 percent

witched insurance carriers, 32 percent held off on hiring a

ew employee, and 24 percent held off on implementing

ew growth strategies.

f particular note is the signicant increase in the numberf small-business owners who reported they have held off

n hiring a new employee due to health care costs. Just

x months ago, 24 percent of small businesses reported

olding off on hiring whereas today, 32 percentone in

reesmall business owners are not hiring directly due to

creasing health care costs.

here also were marked increases in the last six months

mong small businesses that held off on salary increases (50

ercent, up from 45 percent,) held off on growth strategies

4 percent, up from 18 percent,) laid off an employee (13

ercent, up from eight percent,) and delayed the purchase

new equipment (26 percent, up from 17 percent.)

How well would you say you understand howthe new health care reform law is going toimpact your business?

I have a limitedunderstanding

I do nunderst

at a

I have avery clear

understanding

If you qualify for the small-business hea

care tax credits, how much will they helyour business?

July 11 Dec. 10

Signicantly 4% 3%

Moderately 7% 6%

Just a little 13% 11%

Not at all 19% 17%

I do not qualify 22% 20%

Im not sure if I qualify 35% 43%

July 11 D

15%

32

53%

19%

18%

63%

July 11

I plan to maintain my grandfathered insurance plan 28%

I dont plan on being grandfathered but still plan tooffer health insurance

11%

I will likely drop my insurance 15%

I dont currently offer insurance and dont plan to 19%

I dont currently offer insurance but do plan to inthe near future

3%

Not sure 25%

Which of the following statements is moaccurate for your business based on thebenefit plan and other requirements thainto effect in 2014?

More and more small-businessowners are reporting at least a limiunderstanding of the new health calaw, with 82 percent stating they ha

at least a minimal understanding


12/15


The never-ending premium increases are leading to a breaking

where employers have fewer and fewer benet design option

are increasingly forced to make difcult employment decisions

result. Such decisions can easily stymie any kind of long-term

economic recovery.

When it comes to key issues with the health care reform law, a

deal of confusion still exists over whether or not a small busin

health insurance plan can be grandfathered. Nearly one-thir

percent) plan to maintain a grandfathered plan, meaning it

benets at least as good or better than the required benet pacwhich will go into effect in 2014. One-fourth simply are unsu

what they will do. Fifteen percent said they will likely drop

insurance altogether and 11 percent said they dont plan on

grandfathered but still plan to offer a health benets plan. Nin

percent said they do not currently offer insurance and do not

to, whereas only three percent said they currently dont offe

plan to in the near future.

Regulatory BurdenSmall-business owners face unique challenges in navig

federal regulations. Since NSBA has been conducting t

surveys, reducing the regulatory burden has consistently ranked a top issue for Congress and the administratio

address. According to the July 2011 survey, regulatory bur

represent the fourth largest challenge to the future gr

and survival of small rmseven before federal taxes an

national decit.

There exists among the small-business community gro

concern about regulations and the burdens they im

Despite some key progressincluding passage of the

Language Act and several recent moves by the administr

to more closely examine federal regulationsnew burden

regulations continue to stir concerns among small busineSpecically, regulations promulgated by the National L

Relations Board and Department of Labor would unfair

the union elections process against small businesses an

them at a competitive disadvantage to both unions and l

businesses.

The number of small-business owners who picked regul

burdens as a key challenge to the future growth and su

of their business increased from 30 percent to 31 per

Conversely, however, the number of small businesses that ra

reducing regulatory burdens as a top priority for Congress

the administration to address decreased from 17 percent

percent. It still is in the top ve and likely decreased d

dramatic increases in concern over the national decit.

Access To CapitalAlthough many of the financing indicators in this su

point to a slight thawing of credit markets for s

businesses, it is important that the efforts to ex

access to capital not be abandoned. More than

third (36 percent) of small businesses still cannot o

adequate financing for their business, which has dr

implications on business growth.

capital availability is a problem for your business, whatthe effect on your operations?

July 11 Dec. 10

nable to grow business or expand operations 36% 41%

educed the number of employees 18% 24%

nable to nance increased sales 18% 18%

educed benets to employees 12% 17%

nable to increase inventory to meet demand 10% 13%

osed stores or branches 2% 4%

her 3% 4%

July 11 Dec. 10

creased deductible 50% 55%

eld off on salary increases for employees 50% 45%

creased employee share of premium 46% 42%

educed employee benets 42% 37%

eld off on hiring a new employee 32% 24%

witched insurance carriers 28% 25%

elayed purchase of new equipment 26% 17%

eld off on implementing growth strategy 24% 18%

id off an employee 13% 8%

ropped insurance 9% 5%

n what ways have you coped with risingealth care costs? (Check all that apply.)

More than one thirdof small businesses stillcannot obtain adequate

nancing for theirbusiness.

Regulatory burdensepresent the fourth largest

challenge to the futuregrowth and survival

of small rmseven beforefederal taxes and the

national decit.


13/15


n late-2010, Congress passed, and the president enacted,

weeping legislation, the Small Business Jobs and Credit

Act which included myriad provisions to improve small-

usiness access to capital. Specifically, the bill created the

SBA-supported Small Business Lending Fund (SBLF) which

ecently disbursed $337 million to 23 community banks for

mall-business lending. In total, less than 900 community

anks applied for SBLF funding, seeking a total of $11.6

illion in capital.

Exportingxporting remains an untapped marketplace at a time whenmall business could use it the most. According to the July

011 survey, 38 percent of small businessesup from 35

ercent in December 2010have exported goods or services

o a customer outside the U.S. Among the 62 percent that

ever have exported a good or services, 10 percent said

hey would be more likely to consider doing so in the last six

months. This is down slightly from 12 percent in December

010, likely due to the negative economic outlook and

he perceived time/cost associated with launching a new

xporting operation.

Among the various challenges of exporting cited by small

usinesses are: limited goods and/or services available to

xport (37 percent, up from 31 percent,) concerns over

etting paid (28 percent, down from 30 percent,) the

onfusing and difficult nature of exporting (31 percent, up

rom 22 percent,) and costs associated with exporting (17

ercent, up from 12 percent.)

Percentage of Small Businesses Carrying Any(Includes loans, credit cards, property mortgage, invoices owe

What do you consider the largest challenges to syour goods and/or services to foreign customers?(Check all that apply)

July 11 Dec.

I have limited goods and/orservices that are exportable

37% 31%

I worry about getting paid 28% 30%

It is confusing and difcult to do 31% 22%

It is very costly 17% 12%

It takes time away from my regular,domestic sales

15% 12%

I cant get nancing to offer foreigncustomers

5% 7%

75%70%

78%

Today 2 Years Ago 5 Years Ago

Correlation Between Availability of Capital and Employment Growth

0%

%

%

%

%

%

%

%

%

%

%

Increased EmploymeAble to get nancing

199

3

199

4

199

5

199

6

199

7

200

0

2007

Feb

.08

Aug

.08

Dec.08

Ju

ly09

Dec.09

Ju

ly10

Dec.10

Ju

ly11


14/15


CONCLUSIONSmall employers comprise 99.7 percent of a

employer rms in the U.S. One in two worke

in the private workforce run or work for

small business, and one in four individuals

the total U.S. population is part of the sma

business community (equaling 23 percent

the population.) Firms with fewer than 50

employees accounted for 64 percent of net ne jobs between 1993 and the third quarter

2008. Thirty-two percent of those gains cam

from the creation of new, small rms.

According to SBAs Small Business Econom

Indicators for 2003, when the economy gaine

momentum after the previous downturn

the early 1990s, rms with fewer than 50

employees increased their net employment

the rst year after the recession, while largrms continued to shrink. From March 2000

March 2001, small rms added 1.15 million n

new jobs while large rms lost 0.15 million n

new jobs.

While small business has struggled during th

economic downturn and has been slow to reali

its historic role in post-recession job creatio

there are some faintly positive econom

indicators in NSBAs most recent survey. Sma

business owners have greater trepidation abo

the U.S. economic outlook which is slow

seeping over into their condence in their ow

business

The modest gains in access to capital an

employment certainly are positive but cou

prove to be short-lived, given the widesprea

concern small-business owners have expresse

about the overall economy. NSBA believe

more can, and must be done to ensu

entrepreneurship remains a viable, attainab

option for every American. Government leade

ought heed advice to act on items that will sp

economic growth, but also to show restrai

when it comes to any proposal that could furth

shake small-business owners condence an

exacerbate already lacking small-business jo

creation capabilities.

What are the three most significant challenges toe future growth and survival of your business?

FEDERAL TAXES

REGuLATORY BuRDENS

LACk OF AvAILABLE

CAPITAL

STATE AND LOCAL

TAXES

COST OF EMPLOYEE

SALARIES

GROWING NATIONAL

DEBT

COST OF EMPLOYEEBENEFITS, NOT INCLuDINGHEALTH INSuRANCE

LACk OF quALIFIED

WORkERS

COST OF TRAINING

WORkERS

FOREIGN COMPETITION

COST OF TECHNOLOGY

NO MAJOR CHALLENGES

COST OF HEALTH

INSuRANCE

?

27%

30%

26%

18%

10%

19%

10%

8%

3%

9%

2%

2%

37%

68%

42%

22%

31%

22%

13%

8%

30%

7%

14%

4%

8%

4%

2%

33%

68%

40%

ECONOMIC uNCERTAINTY

DECLINE IN CuSTOMER

SPENDING

$

$

$$$

Jly 11 Dec. 10


15/15

1156 15th Street, N.W.Suite 1100Washington, DC 20005www.nsba.biz

trend survey my 2011(v3)

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