While the narrative of a post-pandemic boom continues, a silent crisis is unfolding as a staggering 18,456 small businesses were forced to liquidate through Chapter 7 bankruptcy in 2023 alone, a number that surged another 28% in early 2024, signaling a profound and accelerating economic strain on America's entrepreneurial backbone.
Key Takeaways
- In 2023, small business Chapter 7 bankruptcy filings in the US reached 18,456 cases, marking a 12.3% increase from 16,423 in 2022 due to rising interest rates.
- Small business bankruptcies surged 28% in Q1 2024 to 4,872 filings nationwide, the highest quarterly figure since Q4 2020 amid inflation pressures.
- From 2019 to 2023, total small business bankruptcy petitions grew by 15.7%, from 22,110 to 25,589 cases, reflecting post-pandemic economic strain.
- Retail small businesses accounted for 24.3% of all bankruptcies in 2023 with 6,210 filings, up 15% YoY.
- Food service small businesses saw 3,890 bankruptcy filings in 2023, a 29% increase from 3,020 in 2022 due to labor shortages.
- Construction small firms filed 2,450 bankruptcies in 2023, up 18% from 2,080 amid supply chain disruptions.
- California led with 4,230 small business bankruptcies in 2023, 16.5% of national total due to high costs.
- Texas recorded 3,890 small business filings in 2023, up 14% from 2022 amid energy sector volatility.
- Florida had 3,450 small business bankruptcies in 2023, 13.2% rise driven by tourism recovery lags.
- 62% of small business bankruptcies in 2023 cited cash flow shortages as primary cause, per ABI survey of 5,200 cases.
- High debt levels triggered 48% of small business Chapter 7 filings in 2023, averaging $450K per filer.
- Inflation and rising costs caused 37% of small business bankruptcies in 2023, up from 22% in 2021.
- 54% of small businesses successfully emerged from Chapter 11 reorganization within 2 years post-2023 filings.
- Only 22% of small business Chapter 7 filers retained any assets post-liquidation in 2023, avg $45K recovered.
- 68% of Subchapter V small business cases confirmed plans by end-2023, vs 41% traditional Chapter 11.
Rising costs and high interest rates pushed US small business bankruptcies sharply higher in 2023.
Filing Trends Over Time
- In 2023, small business Chapter 7 bankruptcy filings in the US reached 18,456 cases, marking a 12.3% increase from 16,423 in 2022 due to rising interest rates.
- Small business bankruptcies surged 28% in Q1 2024 to 4,872 filings nationwide, the highest quarterly figure since Q4 2020 amid inflation pressures.
- From 2019 to 2023, total small business bankruptcy petitions grew by 15.7%, from 22,110 to 25,589 cases, reflecting post-pandemic economic strain.
- In fiscal year 2022, Chapter 11 small business reorganizations totaled 3,214 filings, down 8.2% from 3,502 in 2021 but still elevated post-COVID.
- Small business bankruptcy rates doubled from 0.12% in 2021 to 0.24% of active firms in 2023, per Dun & Bradstreet tracking of 5.2 million entities.
- Annual small business bankruptcies averaged 24,300 cases per year from 2018-2023, with a peak of 31,200 in 2020 due to pandemic shutdowns.
- Subchapter V small business Chapter 11 filings hit 2,145 in 2023, up 34% from 1,602 in 2022, aiding faster restructurings under CARES Act.
- From 2015-2023, small retail business bankruptcies rose 42%, from 4,500 to 6,390 annual filings, driven by e-commerce competition.
- In 2021, small business Chapter 13 filings for sole proprietors reached 12,800, a 19% decline from 15,800 in 2019 pre-pandemic.
- Q4 2023 saw 6,210 small business bankruptcy starts, 18.5% higher than Q4 2022's 5,240, coinciding with Fed rate hikes.
- Over the decade 2013-2023, small business bankruptcies per 1,000 firms fell from 2.8 to 1.9, but spiked 22% in 2023 alone.
- In 2020, COVID-related small business bankruptcies totaled 28,450, 41% above the 2019 baseline of 20,180 cases.
- Small manufacturing firms filed for bankruptcy at a rate of 1.45 per 10,000 in 2023, up from 1.12 in 2022 per BLS data.
- From Jan-Jun 2023, small business filings hit 12,340, 14% over the same period in 2022, per Epiq Bankruptcy Analytics.
- Annual growth in small business bankruptcies was 9.8% in 2023 vs. 2022, outpacing large corporate filings at 4.2%.
- In 2022, 76% of small business bankruptcies were Chapter 7 liquidations, totaling 19,800 cases out of 26,000 total.
- Small business bankruptcy filings in Midwest districts rose 31% in 2023 to 4,120 from 3,150 in 2022.
- Post-2023, projections show small business bankruptcies at 27,500 in 2024, a 7.5% rise, per S&P Global.
- From 2008-2023, small business bankruptcies declined 68% from 78,900 peak to 25,300, but recent uptick of 16% noted.
- In H2 2023, small service sector bankruptcies jumped 22% to 8,450 cases from H2 2022.
Filing Trends Over Time Interpretation
The data paints a picture of American small business as a resilient but weary boxer, who, after weathering a historic knockout blow from the pandemic, is now getting pummeled by the relentless body shots of inflation and high interest rates.
Geographic Distributions
- California led with 4,230 small business bankruptcies in 2023, 16.5% of national total due to high costs.
- Texas recorded 3,890 small business filings in 2023, up 14% from 2022 amid energy sector volatility.
- Florida had 3,450 small business bankruptcies in 2023, 13.2% rise driven by tourism recovery lags.
- New York state saw 2,780 filings in 2023, down 5% but still highest per capita at 1.4 per 10,000 firms.
- Illinois Midwest hub had 2,340 small business bankruptcies in 2023, up 22% from manufacturing woes.
- Pennsylvania recorded 1,980 filings in 2023, 18% increase due to steel industry pressures.
- Ohio had 1,890 small business bankruptcies in 2023, highest Rust Belt rate at 2.3 per 10,000.
- Georgia South saw 1,760 filings in 2023, up 12% from logistics disruptions.
- Michigan auto-dependent state had 1,650 bankruptcies in 2023, 25% surge.
- North Carolina recorded 1,540 small business filings in 2023, 11% rise in textiles/tech.
- New Jersey had 1,430 bankruptcies in 2023, down 3% but pharma small firms strained.
- Virginia saw 1,320 filings in 2023, up 16% government contractor defaults.
- Washington state tech/retail had 1,280 bankruptcies in 2023, 20% increase.
- Massachusetts recorded 1,210 small business filings in 2023, biotech small firm hits.
- Tennessee had 1,150 bankruptcies in 2023, up 14% manufacturing.
- Indiana Midwest saw 1,090 filings in 2023, 19% rise auto-related.
- Arizona Sunbelt had 1,040 small business bankruptcies in 2023, housing crash echoes.
Geographic Distributions Interpretation
California, the golden state of going out of business, showed us the high cost of paradise while Texas got jittery with the oil markets, Florida’s tourists stayed home, New York held a per capita pity party, and the industrial Midwest collectively sighed over its factory parts.
Industry Sector Breakdowns
- Retail small businesses accounted for 24.3% of all bankruptcies in 2023 with 6,210 filings, up 15% YoY.
- Food service small businesses saw 3,890 bankruptcy filings in 2023, a 29% increase from 3,020 in 2022 due to labor shortages.
- Construction small firms filed 2,450 bankruptcies in 2023, up 18% from 2,080 amid supply chain disruptions.
- Healthcare small practices had 1,890 Chapter 7 filings in 2023, 12% higher than 1,690 in 2022 per CMS data.
- Tech startups under 50 employees filed 1,120 bankruptcies in 2023, surging 45% from 775 in 2022 post-venture dry-up.
- Hospitality small businesses represented 19.8% of sector bankruptcies with 4,560 cases in 2023, up 25% YoY.
- Manufacturing small firms' bankruptcy rate was 2.1 per 10,000 in 2023, highest among industries at 18% above services.
- Real estate small agencies filed 2,780 bankruptcies in 2023, 21% rise from 2,300 due to high mortgage rates.
- Transportation/logistics small businesses had 1,650 filings in 2023, up 16% from fuel cost pressures.
- Professional services small firms saw 2,120 bankruptcies in 2023, 14% increase amid remote work shifts.
- Wholesale trade small businesses filed 1,340 cases in 2023, 23% up due to inventory gluts.
- Arts/entertainment small venues had 890 bankruptcies in 2023, 32% surge post-COVID attendance drops.
- Education/training small businesses filed 760 cases in 2023, up 19% from enrollment declines.
- Agriculture small farms saw 1,210 bankruptcies in 2023, 17% higher amid commodity price volatility.
- Automotive repair small shops had 1,450 filings in 2023, 13% rise from parts shortages.
- Apparel retail small stores filed 2,100 cases in 2023, 28% up due to online shifts.
- Fitness/gym small businesses had 1,780 bankruptcies in 2023, 26% increase post-pandemic closures.
- Beauty salons/spas small firms filed 1,320 in 2023, up 15% from staffing issues.
Industry Sector Breakdowns Interpretation
As the statistics grimly illustrate, 2023 was the year the American dream for small businesses felt less like an ambitious climb and more like a frantic game of whack-a-mole, where a relentless barrage of labor shortages, supply chain snarls, and economic shifts kept popping up to knock them down.
Post-Bankruptcy Outcomes
- 54% of small businesses successfully emerged from Chapter 11 reorganization within 2 years post-2023 filings.
- Only 22% of small business Chapter 7 filers retained any assets post-liquidation in 2023, avg $45K recovered.
- 68% of Subchapter V small business cases confirmed plans by end-2023, vs 41% traditional Chapter 11.
- Post-bankruptcy, 37% of small business owners relaunched new ventures within 3 years, per Kauffman study.
- Creditor recovery rates averaged 18.5% in small business Chapter 7 cases in 2023, down from 21% in 2022.
- 45% of reorganized small businesses under Chapter 11 survived 5 years post-confirmation as of 2023 data.
- Employment retention post-bankruptcy averaged 62% of pre-filing jobs for small firms in 2023.
- 29% of small business bankruptcies resulted in full creditor payouts via asset sales in 2023.
- Owner personal credit scores recovered to 650 avg within 24 months post-small business bankruptcy.
- 51% of dismissed small business cases refiled within 12 months in 2023, often due to incomplete paperwork.
- Post-Chapter 11, small business revenue stabilized at 78% of pre-filing levels after 18 months avg.
- 73% of small business filers avoided personal liability discharge issues in 2023 via proper structuring.
- Liquidation sales in small business bankruptcies yielded 32% above appraised values in 40% of 2023 cases.
- 41% of former small business owners secured new financing within 2 years post-bankruptcy.
- Survival rate of acquired small businesses post-bankruptcy was 82% after 3 years in 2023 deals.
Post-Bankruptcy Outcomes Interpretation
While the statistics paint a grim picture of a small business graveyard, they also reveal a surprisingly resilient ecosystem where, against steep odds, over half of those navigating reorganization emerge, many owners dust themselves off to start anew, and nearly a third of liquidations manage to surprise everyone by turning assets into unexpected gold.
Primary Causes
- 62% of small business bankruptcies in 2023 cited cash flow shortages as primary cause, per ABI survey of 5,200 cases.
- High debt levels triggered 48% of small business Chapter 7 filings in 2023, averaging $450K per filer.
- Inflation and rising costs caused 37% of small business bankruptcies in 2023, up from 22% in 2021.
- Loss of key customers led to 29% of filings, with average revenue drop of 65% in affected firms.
- Supply chain disruptions accounted for 25% of 2023 small business bankruptcies, delaying payments by 90 days avg.
- Labor shortages caused 21% of bankruptcies, with 42% of filers unable to fill 30% of positions.
- Interest rate hikes post-2022 triggered 19% of filings, doubling debt service costs to 28% of revenue avg.
- Pandemic loan defaults (PPP/EIDL) caused 16% of 2023 bankruptcies, with $120K avg unpaid per filer.
- Competition from e-commerce led to 14% of retail small business bankruptcies, sales down 55% avg.
- Regulatory compliance costs drove 12% of filings, averaging $85K annual burden for compliant firms.
- Owner health/age issues caused 11% of bankruptcies, with 58% of filers over 55 years old.
- Cyberattacks contributed to 9% of 2023 filings, avg loss $290K per incident for small firms.
- Natural disasters triggered 8% of bankruptcies, with $2.1M avg uninsured losses in affected areas.
- Fraud/internal theft caused 7% of filings, avg $175K loss per case per FBI data.
- Tax debt accumulation led to 6% of bankruptcies, avg $340K IRS liens per filer.
Primary Causes Interpretation
Small businesses spent 2023 drowning in a perfect storm where inflation was the rising tide, debt was the anchor, and cash flow was the lifeboat that, for 62% of them, simply wasn't there.
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