Increase in Corporate Collapses: Notable Patterns and Guidance for Executive Management
**"Hey there! You know who's riding the rising tide of business bankruptcies? Joe Camberato, the CEO of National Business Capital, a leading fintech marketplace providing streamlined small business loans.
From March 2023 to April 2024, we've hit a record high - a whopping 40% jump in bizbank filings! It's not just big names feeling the pinch, folks. Industries such as retail trade, services, manufacturing, and finance, insurance, and real estate are taking hits. And guess what's the cherry on top? The services sector, accounting for a staggering 29% of all these bankruptcies, skyrocketed from a historical average of 17% (2005-2023).
Out of curiosity, Cornerstone Research dug a little deeper and found 113 private and public companies, each boasting assets over $100 million, that submitted for Chapter 7 or 11 bankruptcy. In the first half of 2024 alone, a whopping 16 mega bankruptcies took place – companies with over $1 billion in assets. That's the highest number of mega bankruptcies in a six-month period since the Covid-19 pandemic.
By the end of 2024, a total of 23,107 business bankruptcy filings had occurred, marking a 22.1% rise compared to 2023. Now, you might wonder what triggers such a surge.
Just like a forest fire with multiple sparks, business bankruptcies are often caused by a combination of factors. Here are four trends that are giving many companies a run for their money:
- Rising Costs: High interest rates and inflation are the number one reasons companies filed for bankruptcy. Rising costs from raw materials, labor, and energy, together with increased debt management costs, put businesses in a tight spot, making it difficult for them to maintain a positive cash flow.
- Lingering Pandemic Effects: While 2020 saw a 10-year high for business bankruptcies, the ghost of the pandemic is still making its presence felt. Over 79% of mega bankruptcies cited Covid-19 as a significant contributing factor, with many companies struggling with supply chain disruptions, labor shortages, and low profit margins.
- Intensified Competition: Rapidly evolving market dynamics have forced established businesses to contend with more agile competitors. Companies are compelled to lower prices to attract customers, straining their profitability and creating a higher risk of bankruptcy.
- Unsuccessful Pivots: Many companies have faced financial losses due to unsuccessful strategic initiatives during the pandemic. Ambitious ventures to offer new products or switch up marketing strategies, for instance, often failed to materialize as planned, contributing to financial woes for many businesses."
So, fancy joining the Forbes Finance Council? You might just qualify.
- Joe Camberato, the CEO of National Business Capital, a leading fintech marketplace providing streamlined small business loans, is navigating the increase in business bankruptcies, which has seen a 40% jump from March 2023 to April 2024.
- As the services sector accounts for a staggering 29% of all bankruptcies, an increase from a historical average of 17% (2005-2023), proactive measures might be necessary to avoid similar circumstances, much like Joe Camberato's, amid these pressures.
- Cornerstone Research identified 113 private and public companies with assets over $100 million that filed for Chapter 7 or 11 bankruptcy between March 2023 and April 2024, indicating a potential trend that even successful businesses may find themselves in financial distress, as illustrated by the BB1FB55C9E8FAE09258B854586C9DD40 bankruptcy filings.
