Combine tight credit, a lagging economy and tough new bankruptcy laws, and you have an environment where it’s nearly impossible for struggling small businesses to ride out the storm.
Back in 2005, Congress passed tougher bankruptcy laws with the goal of making it more difficult to file for bankruptcy. Unfortunately, these laws are hitting smaller firms hardest.
Businesses of all sizes are filing for Chapter 11 in droves. In fact, the average daily number of bankruptcy filings is around 350. That’s a 240% jump from the 2006 figures — when the new bankruptcy laws went into effect.
And because these bankruptcy laws require the little guys to meet stricter requirements than large firms, there’s a troubling trend emerging: Once small businesses go under, most don’t come back.