Daily News: February 23, 2012

Owners Optimistic About Company Future, Pessimistic About Economy

Most businesses expect stable staffing, capital expenditures in 2012

While most small business owners believe that the country, and the national and state economies are headed in the wrong direction, the vast majority have confidence in the direction of their own companies, according to Union Bank’s National Small Business Economic Survey.

The survey, which included 200 participants statewide and 500 outside of California, found that while nearly half of those surveyed (48%) feel the climate for their small business has worsened in the past two years, an equal number anticipate an improved climate in the next two years. Mindful of past economic challenges, yet hopeful about the future, the majority of respondents plan to maintain the same staffing levels (84%) and capital expenditures (57%) in 2012.

“This survey demonstrates the strength and resolve of those at the helm of small business across the nation who, despite the lack of confidence in the direction of the overall economy, are confident in their own ability to chart a positive course for their business,” said Union Bank executive vice president Todd Hollander, head of Business Banking. “These entrepreneurs have become experts at navigating through challenging economic times, and it makes sense that they’re moving forward with cautious optimism.”

Among the industries surveyed, significantly more respondents in the construction or engineering fields (91%) believe the national economy is headed in the wrong direction. This finding coincides with another part of the survey that found that 13% of respondents in the construction or engineering fields, more than those in all other industries surveyed, believe that the overall climate for their business will greatly worsen in the next two years and none believe it will greatly improve.

Those in the personal services sector were the most optimistic about the future, with 55% expecting the overall climate for their business to improve somewhat or greatly in the next two years.

While most respondents are planning to maintain the status quo following a year of almost equally distributed sales — 32% reported greater sales, 35% indicated the same sales and 33% reported lower sales — more businesses are budgeting for capital spending than hiring. Only nine percent of respondents plan to boost staffing this year, while 20% plan to increase capital expenditures.

Significantly fewer California respondents (7%) are planning to add staff this year compared with last year (24% %) and 4% fewer California businesses are planning to add staff than out-of-state businesses (11%). Conversely, more California respondents (24%) are planning increased capital spending in 2012 than those outside California (18%). For California businesses, planned increases in capital expenditures decreased three percent from last year.

Among the industries surveyed, respondents from retail stores were most optimistic about capital spending and staffing, with one in four expecting increased capital spending and 11 percent anticipating increased staffing.

Overall, about one in five small businesses incurred layoffs in 2011 and seven percent expect to trim their staff in 2012. One in four California respondents reported employee cutbacks in 2011, 5% more than non-California businesses (20%).

Businesses in the construction or engineering fields suffered significantly more employee cutbacks in 2011 than those in all other industries surveyed, with 35% reporting layoffs. Further, 13% of businesses in the construction or engineering industries expect decreased staffing this year, more than all other industries surveyed. Those in the professional services sector (5%) reported the least layoffs in 2011.

Only one in ten businesses applied for a loan or access to credit in 2011. The majority (61%) of those who applied were approved and about a third of those approved (32%) received a government-assisted loan. Significantly less California businesses applied for a loan in 2011 (9%) than the year before (23%).

While 18% of respondents indicated that their business had been positively impacted by actions taken by the government since the recent economic downturn, only seven percent of respondents reported benefiting from the Small Business Jobs Act — legislation providing small banks with $30 billion to encourage lending to small businesses, $12 billion in tax incentives, and expanded Small Business Administration (SBA) loan programs. California businesses (4%) were less likely to report benefiting from the Small Business Jobs Act than those outside the state (9%).

Of those who were helped by the Small Business Jobs Act, the majority (53%) said the biggest benefit was that it encouraged them to invest more in their business, followed by the provision of tax relief (45%) and greater access to capital or credit (35%).

“Union Bank has a nearly 150-year legacy of lending, and we have credit available today for qualified small business owners,” said Union Bank SVP Heather Endresen, head of the bank’s SBA and Government Lending group. “We remain committed to the growth of our specialized SBA lending unit and, for the first time, Union Bank was recently ranked in the top 10 of SBA 504 lenders for the markets we serve.”

To read the press release about the survey results in its entirety, click here.