Optimism among small business owners is strong, according to the latest quarterly Wells Fargo/Gallup Small Business Index conducted April 1-5. The survey also revealed that over half of business owners reported little impact to their tax situation along with a rising interest in credit.

Strong overall optimism correlated with high levels of confidence in present and future financial situations as well, with scores of 62 and 67 respectively. Additional indicators that typically drive higher optimism had strong showings as well. Fifty-two percent of respondents described revenues as increasing over the past 12 months, while 74% said the same of the previous year’s cash flow rating. Estimates of these indicators over the next 12 months also had strong scores, with 58% of respondents expecting gains in revenues while 79% expect a somewhat or very good cash flow rating. When asked how they would rate the current state of the national economy 63% responded it is either “good” or “excellent.”

“What we’re hearing from business owners regarding their revenues and cash flow are encouraging indicators, particularly in a time when many are looking closely at their finances for tax season,” said Andy Rowe, Wells Fargo head of Customer Segments. “Combining these insights with their overall outlook on the economy and a healthy interest in obtaining credit paints a promising picture for businesses as they move forward through 2019.”

Taxes

This quarter’s survey specifically looked at how small business owners felt about their tax situation a year after the reformed tax regulations took effect. Nearly half of business owners (48%) indicated that the recent legislation had little effect on their 2018 taxes, while 51% said the same regarding impacts to their business overall. When asked how their total tax bill for 2018 would be impacted, 56% said it would be about the same as expected, while 22% predicted higher and 12% said lower.

Access to Credit

Another aspect which correlated with strong optimism was access to credit. 53% of business owners indicated that credit was somewhat or very easy to obtain in the last 12 months, with the exact same number predicting this level of ease in obtaining credit in the coming 12 months. In addition, only 1% of respondents indicated credit availability as the top challenge they are facing. Also, over one quarter of small business owners (26%) indicated they were interested in applying for a new credit product (such as a loan, business credit card or line of credit) in the next 12 months.

Top challenge: Attracting new business

Attracting new business is the top challenge for small business owners, with 11% of owners indicating it as the leading issue. In addition, 10% of owners cited hiring as the top challenge, which tied with taxes, in keeping with the timing of the survey, and with competition from competitors/larger corporations.

Financial stability was also cited by 10% of respondents, followed by government regulations, which were cited by seven percent.

Updated methodology

As the landscape of small business ownership and operation has shifted, specifically with the rise of digital/online facets, the Wells Fargo/Gallup Small Business Index has recently shifted its methodology from the previous phone-based surveying to a web-based model. This change was made to reflect the reality of how businesses and their owners operate and to mitigate any biases in the types of businesses owners responding, as well as the responses themselves.

“Having surveyed the small business landscape for more than 15 years, the Small Business Index provides valuable insight into current and future perceptions of business owners,” said Doug Case, Small Business Segment Strategy and Design, Wells Fargo. “These recent updates reflect our interest in ensuring that the index accurately represents small business owner sentiment and providing the business communities with relevant information and resources.”

About the Wells Fargo/Gallup Small Business Index

Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed small business owners on current and future perceptions of their business financial situation. The Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. Results are based on web-based surveying with 600 small business owners, with annual revenues up to $20 million, in all 50 United States conducted April 1-5, 2019. The overall Small Business Index is computed using a formula that scores and sums the answers to 12 questions — six about the present situation and six about the future. An Index score of zero indicates that small business owners, as a group, are neutral – neither optimistic nor pessimistic – about their companies’ situations. The overall Index can range from -400 (the most negative score possible) to +400 (the most positive score possible), but in practice spans a much more limited range.