Small businesses account for close to half of U.S. private sector employment, so there’s always considerable focus on their prospects, especially during periods of rising interest rates and contracting credit. Smaller firms have fewer financing options than larger peers, and they’re much more exposed to variable-rate loans, making them something of a canary in the coal mine. No doubt, the recent run-up in interest rates makes 2024 a year to watch, but America’s smallest employers mostly seem to be tolerating the headwinds and can continue to tread water for awhile longer — just not indefinitely, according to a Bloomberg News commentary. Consider what’s happened so far this year. Small business bankruptcies within chapter 11 (specifically, Subchapter V elections) rose consistently in the first nine months of the year, giving the appearance of a deterioration in firm finances. But business failures were uniquely low during the COVID-19 pandemic thanks to extraordinary federal support. Some businesses survived that would otherwise have gone under even in the absence of the COVID disruptions. So it’s conceivable that part of the increase in bankruptcy activity is simply a reversion to “normal” levels from artificially compressed levels in 2021-2022. That doesn’t mean that small businesses are bulletproof, of course, especially after the recent run-up in borrowing costs. Read more.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
