Small-business bankruptcy filings are rising this year, a signal that increased interest rates, tighter lending standards and higher operating costs are straining entrepreneurs. At the same time, some government aid programs that helped entrepreneurs through the COVID-19 pandemic have ended, the Wall Street Journal reported. The Federal Reserve’s efforts to slow inflation by raising interest rates have been particularly painful for small businesses, which tend to operate with thinner profit margins and smaller cash reserves than larger companies. The increased bankruptcies are coming from filings under Subchapter V, a newer provision in federal bankruptcy code that makes it easier for financially stressed small businesses to restructure. Nearly 1,500 small businesses filed for Subchapter V bankruptcy this year through Sept. 28, nearly as many as in all of 2022, according to the ABI. Many small businesses came out of the pandemic in solid financial shape and are looking to grow. The share of business owners who expect revenue and profits to increase in the next 12 months grew in September, as did the share of those planning to expand their workforce, the survey found. Still, needed capital is more expensive to access and can be difficult to obtain. Small businesses have fewer options for raising capital than bigger companies, which can issue stock or bonds, or go to private-equity investors and other sources for funding, said Soneet Kapila, a bankruptcy trustee and ABI President.
