Trending Now :

Re-Drafting the 2023 IPO Class The Interest-Free Installments Economy FICO Scoring Models: Explained Fed Holds Off on Rate Hike Rise of the Global Middle Class: Opportunities and Challenges Protect Yourself from Financial Scams Money Motivators Mortgage Rate Buydown What Does the Hot Inflation Report Mean for the Housing Market How Do You Build Wealth: Invest in Yourself Times Up for Programmed Money Biggest Financial Crimes: Countrywide Quantitative Tightening, Inflation, & More The Stock Market Is On Sale Investors Need to Netflix and Chill Credit Card Fixed-Interest Loans: Explained Are You Money Smart? Build Your Credit for Free Filing Your Taxes in 2022 Credit Cards that Offer 2% Cashback on All Purchases Navient Ordered to Cancel Student Loans U.S. Mortgage Interest Rates Soaring Two Big Banks Cut Overdraft Fees 2022 IPO DRAFT CLASS: Ranking the Top 10 Prospects Re-Drafting the 2021 IPO Draft All You Need to Know about Buy Now Pay Later companies Credit Card Sign-Up Bonus or SUB The Best Credit Card for the Middle-Class Make An All-cash Offer with No Cash Capitalism Always Ignores Politics All You Need to Know about the Financial crisis of 2007-2008 American Families Face Serious Rent Burden Savings Is An Expense You Can’t Build Generational Wealth If You Are Broke IT’S OFFICIAL: Robinhood is a Meme Stock All You Need to Know About Biden Mortgage Modifications & Payment Reductions Apple Card 2nd Year Anniversary: Should You Get It Now Wells Fargo to Pull Customers Personal Lines of Credit The Rise of Individual Investors The US Housing Market Is Booming. Is a Crash Ahead? Financial Literacy: How to Be Smart with Your Money Non-Fungible Token (NFT):EXPLAINED SKYROCKETED CEO PAY & LONG LINES AT FOOD BANKS Amazon Workers Want to Unionize Another Major City Piloted Universal Basic Income The New Bubble: SPACs SUBMIT YOUR PPP ROUND 2 APPLICATION BEFORE MARCH 31ST Robinhood-GameStop Hearing & Payment for Order Flow Guess Who’s Coming to Main Street Democratic Senators Say No to $15 Minimum Wage BEZOS OUT! President Biden Most Impressive Act Went Unnoticed: CFPB Biden $1.9 Trillion Stimulus Package 2021 IPO DRAFT CLASS: Ranking the Top 10 Prospects $25 Billion Emergency Rental Assistance NO, TESLA IS NOT WORTH MORE THAN TOYOTA, VOLKSWAGEN, HYUNDAI, GM, AND FORD PUT TOGETHER AMAZON TO HAND OUT ITS WORKERS $300 HOLIDAY BONUS Where Does the American Middle-class stand on Student Debt Relief? Joe Biden’s Economic Plan Explained 4 TYPES OF BAD CREDIT REPORTS AND HOW TO FIX THEM What Is the Proper Approach to Not Buy Too Much House? FISCAL STIMULUS PLANS STILL IN ACTION How to Pick Investments for Your 401(k) 10 Simple Ways to Manage Your Money Better All You Need to Know about Reverse Mortgage All You Need to Know about Wholesale Real Estate Credit card Teaser Rates AVERAGE CREDIT CARD INTEREST RATE SURGES TO 20.5 Percent Trump Signs 4 Executive Orders for Coronavirus Economic Relief The Worst American Economy in History WHY CREDIT CARDS MINIMUM PAYMENTS ARE SO LOW? 10 BIGGEST COMPANIES IN AMERICA AND WHO OWNS THEM White House Wants to End the Extra $600-A-Week Unemployment  10 Countries That Penalize Savers FEWER CREDIT CARD BALANCE-TRANSFER OFFERS ARE IN YOUR MAILBOX Private Payrolls and the Unemployment Rate SHOULD YOU BUY INTO THE HOUSING MARKET RESILIENCY? WILL WE GET A SECOND STIMULUS CHECK The Child Tax Credit and Earned Income Tax Credit THE RETURN OF BUSINESS CYCLES Should You Request a Participant Loan or an Early 401(k) Withdrawal? Homebuyers Should Not Worry about Strict Mortgage Borrowing Standards The Potential Unintended Consequences of Mortgage Forbearance All Business Owners Need to Know about the Paycheck Protection Program 10 MILLION UNEMPLOYMENT CLAIMS IN TWO WEEKS HOW WILL THE GLOBAL MIDDLE-CLASS RECOVER FROM A SECOND ECONOMIC RECESSION IN A DECADE? WILL U.S. CONSUMERS CONTINUE TO SPEND? HOW’S YOUR 401(k) PRESIDENT TRUMP SIGNS $2.2 TRILLION CORONAVIRUS STIMULUS BILL MIDDLE-CLASS NIGHTMARE: MORE THAN 3.3 AMERICAN FILED FOR UNEMPLOYMENT CLAIMS IN THE US LAST WEEK. LAWMAKERS AGREED ON $2 TRILLION CORONAVIRUS STIMULUS DEAL CORONAVIRUS STIMULUS PACKAGE FAILED AGAIN IN THE SENATE APRIL 15 (TAX DAY) DELAYED DEMOCRATS AND REPUBLICANS DIFFER ON HOW $2 TRILLION OF YOUR TAX MONEY SHOULD BE SPENT YOU CAN DELAY MORTGAGE PAYMENTS UP TO 1 YEAR, BUT SHOULD YOU? 110 Million American Consumers Could See Their Credit Scores Change The Middle-Class Needs to Support Elizabeth Warren’s Bankruptcy Plan The SECURE Act & Stretch IRA: 5 Key Retirement Changes 5 Best Blue-chip Dividend Stocks for 2020 9 Common Bankruptcy Myths 401(K) BLUNDERS TO AVOID Government Policies Built and Destroyed America’s Middle-Class & JCPenney Elijah E. Cummings, Esteemed Democrat Who Led the Impeachment Inquiry into Trump, Dies at 68 12 Candidates One-stage: Who Championed Middle-Class Policies the Most WeWork: From Roadshow to Bankruptcy Stand with the United Auto Workers Formal impeachment Inquiry into President Donald Trump America Is Still a Middle-Class Country SAUDI OIL ATTACKS: All YOU NEED TO KNOW THE FEDERAL RESERVE ABOLISHED BUSINESS CYCLES AUTO WORKERS GO ON STRIKE Saudi Attacks Send Oil Prices Spiraling REMEMBERING 9/11 What to Expect from the 116th Congress after Their August Recess Should You Accept the Pain of Trump’s Trade War? 45th G7 Summit-President Macron Leads Summit No More Upper-Class Tax Cuts Mr. President! APPLE CARD IS HERE-SHOULD YOU APPLY? THE GIG ECONOMY CREATES A PERMANENT UNDERCLASS 5 REASONS IT’S SO HARD FOR LOW-INCOME INDIVIDUALS TO MOVE UP TO THE MIDDLE CLASS ARE YOU PART OF THE MIDDLE CLASS? USE THIS CALCULATOR TO FIND OUT? WELLS FARGO IS A DANGER TO THE MIDDLE CLASS The Financialization of Everything Is Killing the Middle Class
Small Business Bankruptcy

Small Business Bankruptcy Is On the Rise

The estimated reading time for this post is 147 seconds

Entrepreneurship is a challenging journey, often marked by initial success that can be followed by unforeseen difficulties. 

While 20% of small businesses survive their first year, only half see their fifth anniversary, and a mere third celebrate a decade in operation. This suggests that fewer than 4% of businesses starting today will be around in 2033.

This year has seen a significant increase in small businesses bankruptcy filings under “Subchapter V” of Chapter 11 of the Bankruptcy Code, highlighting the mounting financial stress on this vital economic sector. 

This spike is attributed to various factors: rising interest rates, stricter lending standards, and escalating operating and labor costs. The end of COVID-19 pandemic support programs has further strained many businesses that previously relied on them.

Given their limited financial buffers and narrow profit margins relative to larger corporations, small businesses are particularly vulnerable to economic downturns. 

Their lack of significant cash reserves leaves them exposed to market fluctuations. A considerable number of the recent bankruptcy filings are under Subchapter V, a provision designed to simplify the process for struggling small businesses.

Small Business Bankruptcy: Subchapter V

According to the Wall Street Journal, so far this year, over 1,500 small enterprises reorganized and sought financial relief, a figure almost matching the total from the previous year. Yet, these numbers only scratch the surface. 

Loan delinquencies are increasing, and a staggering 90% of small-business closures happen outside bankruptcy. 

Despite the relatively straightforward and less expensive nature of Small Business Debtor Reorganization, many can’t afford even this option. 

For numerous businesses, their debt isn’t substantial enough to justify an official bankruptcy filing, regardless of their financial difficulties.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 boosted the aggregate debt limit for “Subchapter V” Chapter 11 filings from $2,725,625 to $7,500,000, with the Biden Administration extending this limit until June 2024. 

During the pandemic’s peak, government aid, particularly COVID-19 disaster loans, was instrumental in sustaining many small businesses. 

While the loan terms were attractive— 30 years at 3.75% interest — repayment has become a significant burden for many entrepreneurs, especially those battling to find their feet post-pandemic. 

As of now, nearly 25% of small business borrowers are over 30 days past due on their COVID-19 relief loan payments.

Subchapter V’s role is pivotal. Introduced by Congress in February 2020, it offered an alternative to the often prohibitive costs and constraints of standard Chapter 11 filings. 

With greater awareness and the temporarily raised debt limit, more businesses are opting for this route.

The financial strain isn’t exclusive to small businesses. There has been a sharp rise in overall commercial Chapter 11 bankruptcies, with 2,973 cases in the first half of 2023, a significant jump from 1,766 during the same period in 2022.

Final Thought

As small businesses confront an array of financial hurdles, from soaring interest rates to rising borrowing costs, our entrepreneurial landscape is evolving. 

Policymakers, lenders, and industry leaders must stay alert to these shifts, collaborating to devise strategies and offer much-needed support to the very backbone of our economy.


Senior Accounting & Finance Professional|Lifehacker|Amateur Oenophile

Continue Reading
Click to comment

Leave Comment

Stock News / Jan 02, 2024

Re-Drafting the 2023 IPO Class

The estimated reading time for this post is 147 seconds The Initial Public Offering (IPO)...

Stock News / Dec 29, 2023

2024 IPO Draft Class

The estimated reading time for this post is 151 seconds 2024 IPO Draft Class: Ranking...

Stock News / Dec 22, 2023

Build Wealth with Boring Investments

The estimated reading time for this post is 314 seconds Due to their boredom, long-term,...