Small businesses across the U.S. are feeling more optimistic about the months ahead as financial conditions rebound, but concerns remain about hiring and growth, according to a new report.

Capital One’s Spark Small Business Barometer for the second quarter found that 45 percent of small businesses across the country are reporting that they believe their financial position will be better in six months, a seven-point increase from the fourth quarter of 2012 (38 percent) and a two-point increase from Q2 2012 (43 percent).

The survey indicated that small business owners are financially better off than a year ago, with 35 percent of small businesses saying their firm’s financial position is better than a year ago, compared with 18 percent who report that their financial position is worse—a significant

improvement over Q4 2012, when a two-year high of 27 percent said their finances were worse.
Sixty-four percent of small businesses are optimistic about the local economy where they do business, but slightly less than half (48 percent) are optimistic about the state of the national economy.

Despite the improving optimism about the economy, small businesses are still reluctant to hire. Two-thirds of the small businesses polled do not have plans to hire in the next six months, a 1 point decrease from Q4 2012 (68 percent), but seven points higher than Q2 2012 (60 percent).

“Our survey results for the second quarter indicate that while optimism and confidence are on the rise and more small businesses are on sound financial footing, concerns and uncertainty continue to hold back plans for staffing increases and growth,” said Jon Witter, president of direct, consumer and small business banking at Capital One in a statement. “While many small businesses have seen an uptick in sales over the past six months, this is not necessarily translating into significant new hires or investments in the business.”

More than half (52 percent) of small businesses across the country report that current business conditions are fair or poor, while 46 percent report that business conditions are excellent or good. While the majority of those surveyed report that they are less than optimistic about current business conditions, 35 percent of small businesses say their firm’s financial position is better than a year ago, compared with 18 percent who report that their financial position is worse. This is a significant nine point decrease from the two-year high of small businesses that said their financial position was worse in Q4 2012 (27 percent). This quarter’s results are on par with the slow, but steady trend of business owners feeling better about their firm’s financial shape and positive outlook about future prospects that has developed since Capital One issued its first quarterly survey in Q1 2009.

Nearly half of small businesses across the country are reporting that they believe their financial position will be better in six months (45 percent), which could be attributed to the increase in sales that 35 percent of small businesses saw during the past six months. This is a 7 point increase from Q4 2012 (38 percent) and a 2 percent increase from Q2 2012 (43 percent). This quarter, only 10 percent of small businesses report that they think their financial position will be worse in six months, a significant 10 point decrease from Q4 2012 (20 percent), but a 2 percent increase from Q2 2012 (8 percent). Forty-one percent of small businesses report they believe their financial positions will be about the same in six months.