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Wells Fargo survey: Small business optimism continues to slowly improve

Small business optimism continues to improve, and business owners are feeling more positive about the year ahead, according to the latest Wells Fargo/Gallup Small Business Index.

Overall, optimism among small business owners has reached the highest level in six years. In a quarterly survey of small business owners, conducted March 31 through April 4, the overall Small Business Index score moved to positive 47 in April, up two points from positive 45 in January 2014.

Future expectations are helping increase optimism. The future expectations score, now at a positive 33, is higher than at any point since the start of 2008, however it is still well below pre-recession levels.

Several factors contributed to this modest improvement in small business optimism:

* Small business owners are more positive about their ability to obtain credit in the year ahead. The percent of businesses expecting credit to be difficult to obtain the next 12 months (26 percent) is at its lowest level since the third quarter of 2008.

* Capital spending is slightly more positive. For the second consecutive quarter, more business owners expect to increase the amount of money allocated for capital spending (28 percent) than decrease (23 percent) over the next 12 months.

“The trend of business owners feeling more confident each quarter is a positive sign, yet the level of improvement we see today remains small, and we’re less than halfway between the lowest point in our survey’s 10-year history and the highest levels of business owner sentiment reached in 2006,” said Lisa Stevens, Wells Fargo head of Small Business and Pacific Midwest regional banking president. “These results are one more indicator that the recovery continues for small businesses. During National Small Business Week, we think it’s as important as ever for our country to focus on this important segment of our economy, and start a national conversation on what’s needed to restore small business owner confidence to pre-recession levels.”

When asked how satisfied they are being a small business owner, 56 percent say they are either extremely or very satisfied, up from 51 percent in the third quarter of 2013.

In the April survey, 92 percent of business owners reported feeling somewhat, very or extremely successful. In addition, 84 percent of business owners report they would do it all over again.

In the second-quarter Index, a majority of respondents said securing their financial future (69 percent), being their own boss (66 percent) and setting their own hours (51 percent) were among the reasons they became business owners.

When opening their business, owners said they used personal savings (77 percent), a loan or credit from a financial institution (41 percent), and family and friends (33 percent) as sources of funding.

Financial challenges were the top concerns business owners had when they first set out. When owners were asked to identify the most important challenge they faced when they first opened their business, the number one challenge was securing accounts and customers (23 percent). Other top mentions included cash flow (15 percent) and credit financing/availability of funds (10 percent). Only 2 percent of business owners reported the personal sacrifice and long hours involved in running a business as their biggest challenge.

Even though business owners reported financial challenges when they started out, they are not in business simply to make money. Survey respondents said the most rewarding aspects of owning a small business were the independence of being your own boss (42 percent), job satisfaction (17 percent), flexibility (12 percent), and interactions with customers (11 percent). Only 7 percent of respondents said the financial rewards (7 percent) were the most rewarding aspect.

Business owners are reporting financial success. In the second quarter survey, about eight in 10 (81 percent) small business owners reported being mostly profitable since opening their business.

Wells Fargo, together with Gallup, surveys small business owners quarterly across the nation to gauge their perceptions of their present situation (past 12 months) and future expectations (next 12 months) in six key areas: financial situation, cash flow, revenues, capital spending allocation, hiring, and credit availability.

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