August 26, 2011
By: Chris Kramer
A new study from Equifax Inc. offers hope for the health of small business in America, showing that the number of bankruptcy filings among small businesses declined 15.32 percent from Q1 2010 to Q1 2011.
While the decline suggests an improvement in the current credit health of American small businesses, the figure is still 30.03 percent higher than that of the pre-recession period of Q1 2008.
Equifax conducted the study by examining national bankruptcy trends by metropolitan statistical area (MSA) during Q1 2011 and comparing them to previous timeframes.
"In light of today's shifting economic conditions, bankruptcy trends serve as a valuable prism through which to evaluate the credit health of today's small business market," Dr. Reza Barazesh, senior vice president of Equifax Commercial Information Solutions, said in the agency’s news release.
Of the top 15 MSA’s reviewed in the agency’s research, nine experienced a decline in bankruptcies since Q1 2010. The Denver/Aurora, Colo., MSA showed the largest drop in filings at 26.16 percent.
While the report seems to offer hope for the state of small businesses, the Equifax study also revealed that the pace of decline in small business bankruptcies may be slowing in some areas of the country.
By comparing the rate of decline in bankruptcies from Q3 2010 to Q4 2010 with the decline from Q4 2010 to Q1 2011, Equifax found that key MSA’s reporting some of the highest bankruptcy rates in the country seemed to be flattening out rather than steeply declining in their filing rates.
"Our latest analysis shows that while business failures may be on the decline, conflicting trends are still making us question if the worst is behind us,” Barazesh said.
“Only time will tell if these patterns are just a market aberration resulting from current economic turbulence or a sign of change to come.”