Business bankruptcy filings are down to their lowest rate since 2006.
According to the latest quarterly report from New Generation Research, business bankruptcy filings have continued to decline in the first quarter of 2015. The report shows a 3 percent decline from Q4 2014 to Q1 2015 and a 19 percent decline from Q1 2014. In fact, the filing count is at its lowest since the recession began in 2007.
The decline in numbers of businesses filing for bankruptcy can be traced back to several factors:
- Low interest rates, which translates to lots of available credit for businesses
- A perception among business owners that bankruptcy is expensive
- The fact that many struggling businesses already filed earlier in the recession
However, it’s not all good news for businesses according to this report.
For example, public company bankruptcies have experienced a significant jump in Q1 2015. We saw 26 such bankruptcies in the first quarter alone. This is a 136 percent increase over last quarter. Not only were more public companies filing for bankruptcy; the bankruptcies themselves were also bigger. The total value of assets held by these filing companies was $24 billion, nearly 4 times the value seen in the first quarter last year and the highest quarterly total since 2009.
Small, privately owned businesses continued to make up the bulk of the filings, as is typical in any year. About 80 percent of filings came from businesses with $2.5 million or less in assets, and 42 percent of these were businesses in the service sector.
What Does the Future Hold for Your Business?
Experts and analysts are making all kinds of predictions as to how these trends will hold up in the rest of 2015 and in coming years. The consensus seems to be that the trend of fewer business bankruptcies should continue so long as interest rates stay low. However, interest rates do seem to be climbing slowly but surely after hitting bottom in 2012. Other concerns cited by experts include the fact that large amounts of high yield debt issued since 2009 will soon be coming due and the continuing uncertainty in oil prices.
Of course, the factors affecting your business may be very different. If you have taken on more debt than your business can sustain, you should definitely consider the possibility of eliminating or restructuring that debt with a business bankruptcy. At California Bankruptcy Relief, we will be happy to advise you on the various bankruptcy options that may be applicable to your business based on its ownership structure and assets.
