Discover(R) Small Business Watch(SM): Economic Confidence Index Plummets; More Than...

Discover(R) Small Business Watch(SM): Economic Confidence Index Plummets; More Than Half of Small Business Owners Rate Economy Poor, Getting Worse

Concerns over Cash Flow, Economic Conditions Push Index to
20-Month Low; Economy Nearly Tops All Other Topics Combined as Most
Important Election Issue

Tax Season Poll: Preparation and Documentation Remain Major
Distractions for Small Business Owners
RIVERWOODS, Ill.--(Business Wire)--
After an upward tick in February, small business owners' economic
confidence took a sharp drop in March, casting the Discover Small
Business Watch to its lowest point since its inception in August 2006.
The monthly index in March was 77.8, a 13.1-point decrease from
February, and nearly 40 points lower than a year earlier.

"While the passage of the economic stimulus plan last month and
Fed rate cuts may have influenced February's upturn, the mood is
considerably darker now, said Sastry Rachakonda, director of
Discover's business credit card. "All of the Watch's negative data
points increased, causing the double-digit drop."

March Key Findings:

-- 77 percent of small business owners feel that economic
conditions in the U.S. are getting worse, an increase from 67
percent in February.

-- 53 percent rate the U.S. economy as "poor" compared to 36
percent who said the same in February. Only 16 percent rate
the U.S. economy as "excellent" or "good."

-- 48 percent of small business owners say they see economic
conditions for their businesses getting worse over the next
six months, up from 34 percent in February. This is the lowest
level of confidence expressed by owners regarding their
prospects during the 20 months.

-- 47 percent say they have experienced cash flow issues over the
last 90 days, a slight increase from 43 percent in February.
This is the highest we have seen since the launch of the index

"Of the key indicators in our study, temporary cash flow issues
showed the least amount of change, which generally indicates that Main
Street tends to be more consistent," Rachakonda said. "What has seemed
to change dramatically is the way small business owners are
interpreting what they perceive in the national economic picture; they
realize it could be some time before business picks up."

When asked which issue is most important in the 2008 election, 47
percent of small business owners cited the economy, up 12 percentage
points since January. Following the economy as the most important
election issues are: immigration, 12 percent; the war in Iraq, 11
percent; national security, 8 percent; health care, 8 percent;
government ethics and corruption, 8 percent; Social Security, 1
percent; and 4 percent were not sure.

Poll: Many Business Owners Feel Burden of Tax Preparation as Time
Away from the Business

"Three out of four business owners find the preparation and
documentation process time consuming," Rachakonda said. "Complexity of
the tax code is big distraction that takes their focus away from
building their business."

When it comes to using an accountant or choosing do-it-yourself
software, the human touch still has the advantage: 74 percent of
business owners hired a professional, 15 percent used a software
program and 9 percent did neither. These percentages remained about
the same compared to 2007.

Tax Poll Highlights:

-- 41 percent of small business owners say it is somewhat or very
difficult to find and organize the documents they need to file
their taxes.

-- 29 percent indicated that the tax preparation process is very
time consuming and another 46 percent find the process
somewhat time consuming.

-- 71 percent of small business owners say that the complexity of
the tax code is a distraction from their focus on the needs of
their businesses.

-- Of those who are expecting a tax refund this year, 44 percent
of consumers and 38 percent of small business owners say they
will use it to repay debts. Twenty-seven percent of consumers
say they will use their refund for personal use, while 19
percent of small business owners say they will use the extra
cash for business purposes.

-- Small business owners are more likely than consumers to use a
tax professional: 74 percent of small business owners plan to
get help, while only 58 percent of consumers said they would.

-- 51 percent of small business owners say that tax professionals
are worth the fees they charge, compared to 41 percent of
consumers who agree.

-- Word of mouth is a determining factor when hiring an
accountant: 54 percent of small business owners seek "someone
they know and trust," and 26 percent more seek a "referral
from friends or relatives." The percentages are similar among
consumers, with 49 percent depending on someone they know and
25 percent taking a referral from family and friends.

"Aside from the tax insights, this poll clearly points out the
importance of word-of-mouth advertising to small business owners,"
Rachakonda said. "Accountants, contractors, real estate brokers - all
small business owners - understand that quality of service for their
current customers is their best friend when it comes to winning their
next customer."

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, and
PULSE, one of the nation's leading ATM/debit networks. For more
information, visit www.discoverfinancial.com.

Discover Financial Services
Jon Drummond
224-405-1888
or
Robinson Lerer & Montgomery
Daniel Delson
646-805-2036

Copyright Business Wire 2008