Small businesses across the U.S. are reporting generally modest but steady improvement in their finances, according to a new survey.

The quarterly survey, by Capital One, found that small businesses started the year on a more solid footing in the first quarter of 2012. The initial gains over last year have remained consistent, and even showed some improvement in the second quarter of the year. On the hiring front, the survey found a two-year high in the percentage of small businesses planning to add jobs over the next six month, with 37 percent reporting plans to hire.

The majority of small businesses reported that their business financials have remained stable or improved, with 44 percent reporting improved financial position compared to a year ago. However, small business perceptions regarding local economic conditions remain relatively unchanged.

Despite the improvement in company financials, the data shows small business owners are less optimistic about business prospects in the months ahead. The national business outlook indicates that concerns over sales and price margins, have diminished small business confidence in their prospects for the remainder of 2012.

“This quarter’s survey results suggest that business is generally holding steady for small businesses,” said Capital One president of retail and direct banking Jon Witter in a statement. “The current economic environment and overall business performance continue to hold their own or improve, and while hiring is far short of pre-recession levels, we’re seeing small businesses making plans to hire new employees in numbers that are among the highest we've seen in the past two years.”

Economic conditions for small businesses nationally are holding steady. Nearly half (45 percent) of the small businesses surveyed reported that economic conditions for their business are about the same, a 2 point increase from the previous quarter and one point lower than in the second quarter of 2011. More than a third (38 percent) of small businesses reported improving economic conditions, 1 point lower than last quarter and 6 points lower than the two-year high of 44 percent in the second quarter of last year.

While a majority of small businesses believe economic conditions are the same or improving, a sizable portion of small businesses (17 percent) believe economic conditions are getting worse.
The majority of small businesses said they are in a better financial position than last year.

Forty-four percent of small businesses said their financial position is better than a year ago. This represents a 2 point increase from the previous quarter, and higher than those who say that their position is about the same (40 percent). Only 15 percent of small businesses said their financial position has gotten worse. This is 2 points lower than the previous quarter, but is still 6 points higher than the two-year low of 9 percent set in Q2 2011.

Small business perceptions of the economic outlook for business prospects over the next six months show that owners are mildly optimistic. The national business outlook is a measure of business prospects over the next six months on a scale of significantly worse (1) to significantly better (10). Even though they are faced with favorable economic conditions and better financial performance, small businesses rate the national business outlook at 6.0 out of 10 points, 0.4 points lower than the 6.4 from the previous quarter. Conversely, all business indicators are having a larger impact on business prospects than last quarter. Price margins are expected to have the most impact on business prospects, also having the largest change since last quarter (0.7-point increase).

Across the country, more small businesses are forecasting increases in hiring employees in the next six months. More than a third (37 percent) of small businesses plan to hire additional employees, a two-year high. This is two points higher than last year (Q2 2011) and 3 points higher than last quarter (Q1 2012). Difficulty in finding the right talent to fill available openings remains relatively consistent with last quarter. Sixteen percent of small businesses said they have job openings they are unable to fill, up 1 point from the previous quarter.

The majority of small businesses plan to keep spending, business development and investment consistent. Seven in ten of the country's small businesses plan to keep spending at the same levels, the highest amount in the last two years. This is a nine-point increase from the previous quarter and five points higher than it was one year ago. This shift parallels the decrease of small businesses that plan to increase spending. Only 15 percent of small businesses forecast increasing business development and investment spending, 10 points lower than the previous quarter and 12 points lower than the two-year high of 27 percent one year ago.

In the second-quarter survey, a quarter of U.S. small businesses reported they have tried to obtain financing in the last 12 months. This figure, the highest it has been over the last nine quarters of survey data, is 2 points higher than the previous quarter and 9 points higher than one year ago in the second quarter of 2011.

Among businesses seeking to obtain financing over the last 12 months, the manufacturing and construction sectors represent the highest percentage of those seeking the extra support. More than two-fifths (42 percent) of small businesses report that obtaining financing is harder than it was six months ago, a decrease of 10 points from the previous quarter. Only 9 percent of small businesses reported that obtaining financing is easier than it was six months ago, a decrease of 5 points from the previous quarter.

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