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Why are business bankruptcy filings on the rise?

On Behalf of | Oct 26, 2023 | Business Bankruptcy, Business Restructuring & Insolvency

Corporate America is accustomed to erratic changes in consumer behaviors, market conditions and economic activities. With all these external elements and potential internal conflicts, business owners must know that filing for bankruptcy is always possible.

Unfortunately, since the pandemic influenced a corporate bankruptcy wave in 2020, recent research shows that commercial bankruptcy filings are rising again. Knowing what causes this surge can help owners check their options on how to proceed and prevent their operations from ceasing.

Reasons for the business bankruptcy uptick

The previous year’s commercial filings with a total of 12,748 increased by 23.3%, with 15,724 applications as of this June. By August, the numbers had still escalated by 14% from 2,045 last year to 2,328 filings this year.

Aside from the pandemic’s residual impact, analysts point to the following reasons that make it difficult for businesses to settle their debts and restructure their finances with new arrangements:

  • Inflation-induced price hikes: Entail supply chain disruptions and steep operational costs, raw materials or workforce wages
  • Conservative lending standards: Enforce tighter bank policies that discourage risks
  • Elevated interest rates by central banks (e.g., the U.S. Federal Reserve): Make it expensive and more difficult to borrow money for working capital and future investment

These complex factors are often interconnected and vary based on the industry and its unique economic circumstances. For instance, consumers tend to buy less as products cost more. Businesses that sell essential goods, such as food and health care, may not feel as much of a tragic impact as the ones with less urgent services and products, such as clothing and jewelry.

Ways an attorney can help find solutions

Struggling businesses often turn to bankruptcy to rectify their financial footing. However, filing for bankruptcy hastily may do more harm than good. It has evolving nuances that require sound decision-making. Thus, a Florida legal team well-versed in state and federal business laws can help fill the gaps. They can come up with a plan that offers lasting solutions. Doing so can help businesses repay their debts and look forward to a healthy financial future.