Headlines proclaiming a historic surge in American 'mom and pop' shop failures have sparked concern, but a closer look at the data reveals a far more nuanced and reassuring picture for the small business sector.
The 'Record' Bankruptcy Numbers in Context
According to figures from Epiq Bankruptcy Analytics, 2,221 small businesses in the United States filed for bankruptcy protection in 2025 under a specific provision known as subchapter V. This marked an increase from the previous year, a fact seized upon in some political commentary.
However, the year-on-year rise was just ten filings, moving from 2,211 in 2024. Furthermore, when viewed against the total population of small enterprises, the figure becomes almost insignificant. The US Small Business Administration estimates there are more than 33 million small businesses operating across the country.
This means the much-discussed 'historic high' in filings represents a tiny fraction of the overall business community. The increase also coincides with greater awareness of the subchapter V process, which was only established in 2019.
Why Formal Bankruptcies Remain Rare for SMEs
Given the well-documented failure rate of startups—where an estimated 70% close before their fifth year—the relatively low number of formal bankruptcies might seem puzzling. The period from 2019 to 2024 saw an unprecedented boom in new business applications, with over 21 million submissions.
The explanation lies in common practice. Most small business owners simply walk away rather than file for bankruptcy, avoiding costly legal fees. Creditors and suppliers to these smaller operations often write off the losses as a cost of doing business, rather than pursuing lengthy court proceedings.
"I've worked with hundreds of businesses over two decades and have hardly ever encountered one that files for bankruptcy," notes commentator Gene Marks, highlighting the cultural and financial disincentives to formal proceedings.
A Landscape of Optimism and Growth
Contrary to a narrative of widespread distress, most indicators point to a robust and confident small business environment. Surveys from the National Federation of Independent Businesses show optimism levels exceeding the 52-year average.
Further data from Comerica Bank indicates that 79% of small firms anticipate revenue growth in the coming year, while the US Chamber of Commerce reports high confidence among its members looking ahead to 2026.
Even when considering all business bankruptcies regardless of size, filings in 2024 and 2025 remained 25-50% lower than the averages seen between 2009 and 2019, a period encompassing the aftermath of the financial crisis.
The story of small business bankruptcies in America is, therefore, one where a minor statistical increase has been amplified out of proportion. The core of the SME sector appears healthy, adaptive, and focused on future growth, with formal bankruptcy remaining an exceptional last resort rather than a common outcome.
