Press Release

• HEALTHCARE: 85% of Small Businesses Do Not Offer Healthcare to Employees



• ECONOMY: More than Half of Small Business Owners Do Not Foresee Need to Raise Cash to Stay in Business

RIVERWOODS, Ill., Jan 26, 2009 (BUSINESS WIRE) -- After a brief rebound in December, economic confidence among small business owners dipped in January as fewer owners plan to increase spending for business development. The Discover(R) Small Business WatchSM index fell to 71.4 in January, down 1.4 points from December.

"Although small business owners expressed a little more optimism at the end of 2008, most remain cautious and concerned as we begin a new year," said Ryan Scully, director of Discover's business credit card. "As a result, we are seeing more owners hang onto their cash and put business development spending plans on hold for now."

Only 19 percent of owners say they plan to increase spending on business development over the next six months, the lowest number for this category in the Watch's 30-month history. Forty-six percent say they plan to reduce spending on business development and 30 percent are not making any changes.

Another factor in this month's decline in optimism is a decrease in the number of small business owners who see economic conditions for their businesses improving. Seventeen percent of small business owners believe that economic conditions for their businesses are getting better, down from 21 percent in December. Those who feel conditions are getting worse is unchanged at 51 percent, while 25 percent feel conditions remain the same, up slightly from 23 percent last month.

Other January Findings:

-- Only 8 percent feel the economy is improving, down from 12 percent in December. Sixty-nine percent of owners think the U.S. economy is getting worse and 17 percent see no change, which is largely in line with December.

-- The number of owners who say they have experienced temporary cash flow issues in the past 90 days decreased in January to 38 percent from 42 percent in December.

-- 61 percent rate the economy as poor, down from 63 percent in December and 65 percent in November; only 6 percent rate the economy excellent or good, mirroring December's results, while 33 percent describe the economy as fair.

Fewer Small Businesses Offering Healthcare to Employees

Eighty-five percent of small business owners say they do not offer health insurance to their employees, up significantly from 77 percent a year ago and 74 percent in January 2007. Among small business owners who do offer health insurance, 36 percent say they have considered discontinuing coverage because of high costs.

A third of small business owners say healthcare costs have a major impact on their ability to grow their business: 69 percent say that obtaining affordable healthcare for themselves and their employees is "very" or "somewhat" difficult, which is unchanged from last year.

"Over the last two years, the number of small business owners who offer health insurance to their employees has fallen significantly," said Scully. "While small business owners are finding ways to stay afloat in this tough economy, eliminating healthcare benefits could be another measure of the cost of that resiliency."

Additional healthcare findings include:

-- When asked whether any of their employees go without any health insurance, 28 percent of owners said yes, 49 percent said no and 23 percent weren't sure.

-- 25 percent of small business owners are uninsured, which is unchanged from a year ago and up from 18 percent in January 2007. For the remaining three-fourths of owners, 11 percent get insurance through a company plan, 29 percent obtain insurance through a family member's plan and 32 percent purchase it separately.

-- Among consumers, healthcare benefits were a selling point for 68% of them in their decisions to accept their current jobs. In the Watch's survey of 4,000 consumers, 43 percent say healthcare benefits were "very important" when accepting their current job, 25 percent say they were "somewhat important," 18 percent answered "not very important," 9 percent said "not at all important" and 5 percent weren't sure.

53% of Owners Say They Will Not Have to Raise Funds to Stay in Business

When asked whether they will have to raise money this year in order to keep their businesses running, 53 percent of small business owners say they will not, while 32 percent expect to need additional funds, and 15 percent were not sure.

Of those who say they will need extra money to stay afloat:

-- 20 percent will look first to friends and family

-- 19 percent will tap personal savings

-- 18 percent will seek a bank loan

-- 9 percent will use credit cards

-- 1 percent will apply for a home equity loan

-- 24 percent will choose some other form of funding

-- 10 percent weren't sure

The views and opinions expressed by small business owners and consumers who participate in the Small Business Watch survey are their own and do not necessarily reflect those of Discover Financial Services or its affiliates.

About the Small Business Watch

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of U.S. small business owners who employ less than five employees, a segment that consists of 22 million businesses producing more than a trillion dollars in annual receipts. The Watch is based on a national random survey of 1,000 small business owners. It is commissioned by the Discover Business Card, which strives to offer the best business credit card for American small businesses, and is conducted by Rasmussen Reports, LLC (www.rasmussenreports.com), an independent survey research firm. The numeric index is calculated by assigning values to responses to a set of six consistent questions. The base value of the Watch was established at 100.0 based on surveys conducted in August of 2006. In addition to generating the index, the Small Business Watch surveys small business viewpoints on key business drivers, and also surveys 4,000 consumers to gauge purchasing behavior and attitudes towards small businesses. For past results and small business survey data, visit www.discovercard.com/business/watch. For information on Discover Business Card, visit www.discovercard.com/business.

About Discover Financial Services

Discover Financial Services (NYSE: DFS) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. The company operates the Discover Card, America's cash rewards pioneer. Since its inception in 1986, the company has become one of the largest card issuers in the United States. Its payments businesses consist of the Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in 185 countries and territories. For more information, visit www.discoverfinancial.com.

SOURCE: Discover Financial Services

Discover Financial Services
Jon Drummond
224-405-1888
jondrummond@discover.com
or
Robinson Lerer & Montgomery
Daniel Delson
646-805-2036
dmd@rlmnet.com