Private Bankruptcy Filings Are Blowing Past Their COVID-Era Peaks as Credit Stress Builds for Small Businesses
Warning signs of a potential credit crunch were flashing even before Silicon Valley Bank's stunning collapse, as this year sees record high bankruptcy filings by small- to mid-sized private businesses, according to UBS, Business Insider reported. Financial markets this month were whipped around after the biggest bank failure since the global financial crisis highlighted worries about the impact of tighter credit conditions for American businesses and consumers. ["We] believe one of the more underappreciated signs of distress in U.S. corporate credit is already emanating from the Small and Mid-size Enterprises sector," Matthew Mish, head of credit strategy at UBS, wrote in a recently published research note. Some of the "smallest of firms facing the most severe pressure from rising rates, persistent inflation and slowing growth," said Mish. So far in 2023, private bankruptcy filings have outstripped a peak set in the early stage of the COVID pandemic by a wide margin. The four-week moving average of 7.8 in late February towered over the 4.5 moving average in June 2020, UBS Evidence Lab said in the note. The weekly data collected by UBS flicks to worrisome trends about smaller businesses going belly-up even before the month's banking industry shakeup stemming from the failures of SVB and crypto-friendly Signature Bank. The FDIC is facing more than $20 billion in costs after coming to the rescue of depositors at those banks, stoking concerns that other small banks will come under liquidity stress and pull back on lending to businesses and retail clients.
