Visa Outlines Opportunities For Small Businesses Growth, Despite Economic Slowdown

Visa Economist Provides Cautiously Optimistic Outlook in Speech to Microsoft’s Small Business Summit – Outlines Tips to Help Small Businesses Navigate Economic Uncertainty

REDMOND, March 19, 2007

Opportunities still exist for small businesses to grow, despite an overall slowdown in the economy, according to Wayne Best, senior vice president of Business and Economic Analysis for Visa USA. Best struck a note of cautious optimism in his keynote presentation at the Microsoft Small Business Summit, based on his analysis of macroeconomic trends, Visa spending data and small business studies.

Macroeconomic data compiled and analyzed by Visa USA provides a mixed outlook. Although gross domestic product (GDP) was robust in 2006, Best expects to see lower consumer spending growth, or personal consumption expenditures (PCE), in the coming year. PCE growth is forecast to grow at 4.9 percent in 2007, down from 6 percent in 2006.

"The trend of lower PCE growth is driven by weaknesses in the housing market, which is pushing down mortgage equity withdrawals," said Best. "While the economy may slow, the common denominator with the past will still be the resilience of consumer spending. Consumers will continue to take the lead in driving economic growth, with consumer spending representing 70 percent of our economy."

Despite the divergent economic indicators, Best said small businesses remain bullish on the future, and he attributed continued optimism to relatively low interest rates and a stronger job market[1]. Meanwhile, taxes and the cost/availability of insurance are the two most pressing concerns for small businesses, followed by the tight labor market, he said.

As a hedge against current economic uncertainty, Best identified five tips for small business owners:

Improve cash flow management - Managing cash flow is the most important challenge facing small businesses. This is particularly relevant in an economic environment where customers are sensitive to price increases and are seeking to delay payments. "Business owners should look at payment solutions, such as payment cards, that allow them to time cash outlays and reduce the headaches associated with managing account receivables," Best said.
Adapt to tighter labor market - Small business owners should conduct employee searches through new channels and implement innovative approaches to retaining valuable employees. Today's technology allows small businesses to harness the Internet to recruit new employees and clearly delineate the advantages of working at their small business on a real time basis.
Make smart investments - This is a good time to make smart investments in business expansion or upgrade infrastructure, such as technology. Investments that have a quick return can be achieved under the current moderate interest rate environment. These returns can include productivity improvements that are attributable to investments in selective software and hardware.
Don't lock into long-term leases - Given the uncertain impact of housing trends, small business may have an opportunity to negotiate more favorable leases.
Financial flexibility will lead to business stability - Small businesses need to adapt to the changes in the economy by choosing financial products that are best suited to their business needs.

"At Visa, we are proud of our ability to provide small businesses with the financial flexibility they need through leading-edge payment products," said Raghav Lal, senior vice president, Small Business Products, Visa USA. "We remain committed to working with our member financial institutions to deliver solutions that can be customized to the specific needs of small businesses, such as multiple payment products with intuitive and powerful reporting; business specific rewards and merchant offers; unsurpassed acceptance; and robust security."

"Small business owners are at the forefront of the U.S. business landscape and therefore are excellent barometers of our economic health," Best said. "While economic indicators point to a slowdown in the economy, small business owners, who are the engine of our economy and are natural innovators and optimists, clearly see the glass as half full, rather than half empty."

Visa Small Business Solutions
Visa USA is a leader in small business solutions, surpassing $100 billion in annual volume in 2006. Visa has designed a tailored suite of products and services to empower small business owners with choice and convenience. With Visa payment cards, small business owners can choose when and how they want to pay. Products include the Visa Business Credit Card, Visa Business Check Card, Visa Business Line of Credit, and Visa Signature Business. Visa Business cards offer added value for small business cardholders with services including automatic bill payment; promotions and savings through Visa Business Partner Advantage; the opportunity to earn rewards for everyday purchases through Visa Extras; and customized reporting solutions through Visa Information Source Select to better organize and track small business spending.

About Visa USA
Visa USA is a leading payment brand and the nation's largest payment system, enabling banks to provide their consumers and business customers with a wide variety of payment alternatives tailored to meet their evolving needs. Visa USA is committed to increasing the choice, convenience, acceptance and security of Visa payments for all stakeholders in the payment system -- members, cardholders and merchants. Through its 13,382 member financial institutions, more than 510 million Visa-branded cards have been issued to cardholders in the United States. Worldwide, cardholders in more than 150 countries carry more than 1 billion Visa-branded cards, accounting for more than $3 trillion in annual transaction volume. VisaNet, Visa's global processing system and the world's largest financial network, processes transactions with unparalleled reliability.

[1]Based on a survey conducted by the National Federation of Independent Business (NFIB) in March 2007.

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