Small Business Bankruptcies: Halt in Notable Decline
Small businesses make up an integral part of the nation's economy, offering hope for many to attain that proverbial American dream. Even with an unstable economy, small business bankruptcy rates had been on a steady and notable decline until recently.
Small businesses bankruptcy filings enjoyed a significantly higher rate of decline than consumer bankruptcy filings - at least until the first half of 2011. The decline of small business bankruptcy filings has slowed the past few months, a trend that could mean the American dream - and the nation's economic recovery - is still largely out of reach.
During the last quarter small business bankruptcies only declined one percent. Previously, after a 2009 peak, small business bankruptcies experienced a steady drop of at least 4.4 percent each quarter last year. Chapter 7, 11 and 13 bankruptcy filings for firms with less than 100 employees are compiled when determining the Small-Business Bankruptcy Index.
Reduced consumer demand is a major cause for continued small business bankruptcies, but the potential impacts may not be as obvious. Small businesses create jobs, competition, opportunities for entrepreneurship, financial independence and social mobility. They are also largely responsible for new ideas, with small business employees receiving at least 13 times the amount of patents compared with their large business counterparts, according to a study out of the University of Central Arkansas entitled "Small Business: Cause of Bankruptcy."
The health of small businesses undoubtedly reflects the overall health of the American economy, the "Bankruptcy" study notes, meaning both might be much weaker than hoped.
