Small business economic confidence rebounded in October as more small business owners reported that economic conditions for their businesses and for the country have improved, according to a new poll that also found small business owners favoring a Republican-controlled Congress in the midterm elections.

The Discover Small Business Watch survey of small business owners found that a steadier cash flow prompted the biggest gain since April in its monthly index of small business economic confidence. The monthly index rose to 84.2 in October, up 10.4 points from 73.8 in September.

"The fall season has ushered in more positive views of the economy, but in this politically charged atmosphere, small business owners are likely in a holding pattern with the rest of us to see how the economy responds after Election Day," said Ryan Scully, director of Discover's business card. "When we asked small business owners whether there would be a greater impact on the economy if Republicans win control of Congress or Democrats remain the majority, they leaned in the direction of having a change."

This month, 28 percent of small business owners expect economic conditions for their businesses to get better in the next six months, up from 20 percent last month; 43 percent think conditions will worsen, down from 55 percent, 24 percent expect them to stay the same.

Perceptions of the overall economy's direction also are improving. In October, 31 percent of small business owners say the economy is getting better, up from 26 percent in September; while 48 percent say it's getting worse, and 17 percent think it's the same.

The outlook for spending on business development is improving: 22 percent of small business owners plan to increase spending, up from 16 percent last month; 46 percent plan to decrease spending, down from 57 percent in September; and 30 percent expect no changes for the next six months. 46 percent of small business owners report having cash flow issues, unchanged from last month; while 50 percent said they do not have cash flow issues. Sixty-one percent of small business owners rate the economy as poor, down from 68 percent last month; 31 percent rate it fair, 5 percent rate it good, and 2 percent rate it excellent.

When it comes to the economy, small business owners believe a Republican-controlled Congress would have a greater impact: 51 percent of small business owners say it would be better for the GOP to control Congress, 39 percent said it's better for Democrats to remain in control, and 12 percent aren't sure.

Forty-nine percent of small business owners would choose the Republican candidate if the elections were held today, 38 percent would vote for the Democrat, 4 percent would choose another party and 9 percent are not sure.

The Republican Party comes out on top when it comes to which political party is better at understanding the needs of small business owners, a gap that has widened in the past two years: In October, 45 percent of small business owners gave the nod to Republicans, 30 favored Democrats, and 20 percent said neither party understands their needs. However, a little more than a month prior to the 2008 elections, 43 percent of small business owners thought the GOP represented their interests better with the Democratic Party close behind at 40 percent; rounded out by 5 percent who think another party understands them better, and 12 percent who were not sure.

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