Jan 4, 2024

Rising Small Business Bankruptcies Are a Red Herring

Rising Small Business Bankruptcies Are a Red Herring

We invite you to read Jonathan Levin's column which considers what is happening with small businesses during the year and highlights that Chapter 11 small business bankruptcies in the published graph increased steadily in the first nine months of the year, giving the appearance of a deterioration in company finances.When they talk about the smallest companies in the United States, they tell us a lot about the vulnerabilities of the economy.

So far, they have resisted rising borrowing costs.

But business bankruptcies were exceptionally low during the Covid-19 pandemic thanks to extraordinary federal support.

Some businesses survived and would otherwise have gone under even without Covid disruptions.

Therefore, it is conceivable that some of the increase in bankruptcy activity is simply a reversion to “normal” levels from artificially compressed levels in 2021-2022. Of course, that doesn't mean small businesses are bulletproof, especially after the recent rise in borrowing costs.

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