Business bankruptcies

Business bankruptcies in the United States are projected to increase significantly in 2025, reaching an estimated 26,511 units, which marks a 14.7% rise on the prior year. This increase is primarily driven by persistent high interest rates and ongoing inflation, which have elevated operational costs and placed continued pressure on profit margins. The financial strain has made debt servicing increasingly challenging for businesses, particularly for those operating in economically sensitive industries such as retail and hospitality. Weakened consumer demand and broader economic uncertainty are also significant factors undermining revenue streams. Additionally, competitive market conditions and the rapid adoption of disruptive technologies are destabilizing established business models, further contributing to financial distress.

From 2021 through 2025, macroeconomic volatility has dictated the trajectory of business bankruptcies. In the immediate post-pandemic period (2021–2022), the number of bankruptcies decreased sharply as a result of extensive government stimulus, including grants and loans that provided liquidity to businesses and staved off insolvency. In 2021, business bankruptcies fell 33.7% to 14,347, and declined again by 6.0% in 2022. However, as stimulus effects faded and businesses began to face the burden of repaying pandemic-era debts, overall financial stability eroded. Inflation accelerated, leading to an increase in both input costs and interest rates, while ongoing supply chain disruptions and geopolitical tensions compounded operational challenges. Consequently, bankruptcies rebounded sharply in 2023, rising 40.4% to 18,926, and continued to climb by 22.1% to reach 23,107 in 2024. These conditions have been particularly pronounced for small-to-medium sized enterprises, which generally have less capacity to absorb macroeconomic shocks. The recent trend reversal from the earlier pandemic period reflects the cumulative effect of tightened credit conditions, higher costs of capital, and sluggish demand.

Throughout the 2021–2025 period, business bankruptcies have been shaped by major structural shifts. While many companies utilized improved access to credit and equity markets to refinance or restructure debt during the pandemic, the transition to a more inflationary, high interest environment revealed vulnerabilities in business models. Furthermore, increased competition, digitalization, and shifting consumer preferences required rapid adaptation, and businesses unable to keep pace with these changes were particularly exposed. Although some companies responded by streamlining operations and tightening financial management, these strategies were not sufficient to offset the acceleration in macroeconomic pressures. As a result, the period ends with bankruptcy rates at their highest levels since the onset of the COVID-19 pandemic.