Business Bankruptcies

Business bankruptcies in the US are fueled by various challenges. As high interest rates and persistent inflation elevate operational costs, profit margins are squeezed, and debt management becomes arduous. Simultaneously, weakened consumer demand and broader economic downturns diminish revenue streams, particularly in vulnerable sectors like retail and hospitality. Adding to these pressures are dynamic market forces, where heightened competition and disruptive technologies destabilize traditional business models.

The decline in business bankruptcies over the past decade can be attributed to several factors. A prolonged period of low interest rates made borrowing more affordable, enabling businesses to manage debt more effectively. Economic recovery following the Great Recession and substantial government stimulus during the COVID-19 pandemic provided financial support, helping many businesses avoid insolvency. Additionally, improved access to credit and equity markets allowed companies to refinance or restructure debt. Finally, businesses adapted to changing economic conditions by streamlining operations and implementing more robust financial management practices.

Despite the substantial decline in bankruptcies over the past decade, the current period has seen a lot of fluctuations, mainly due to the impact of COVID-19. Government stimulus packages initiated during the pandemic, including loans and grants, provided businesses with additional funds to continue their operations between 2021 and 2022. However, high inflation and elevated interest rates, along with the need to repay debt that many businesses undertaken during the pandemic led to a spike in the number of bankruptcies through 2024. The number of business bankruptcies is projected to continue its upward trajectory in 2025, driven by persistently high interest rates and trad