In recent months, thousands of businesses have struggled to stay afloat. Many have enacted cost-cutting measures like reducing salaries, furloughing employees and cutting expenditures. For some companies, these solutions are enough to keep them operating for one more day. For others, it simply delayed the inevitable.
To cope with their crushing financial burdens, many businesses have found no other option than to file bankruptcy. But the rapid surge of bankruptcies has shocked many experts. In the past year, bankruptcy filings have increased by 40% in New York City alone.
An alarming surge in bankruptcies
Compared to the figures from last year, the rate of bankruptcy proceedings has grown by 40%, estimates Bloomberg. The financial news organization collected data from business entities of various industries throughout the New York metro area. According to its findings:
- More than 600 companies in New York’s Southern and Eastern Districts have filed bankruptcy since March
- The industries with the highest number of bankruptcies are retail and hospitality
- Large businesses are more likely to file bankruptcy than small businesses
- Small businesses are more likely to close permanently than large businesses
- More than 4,000 companies in New York City have shut down since March
Financial analysts point to the recent economic slowdown, travel restrictions and reduced tourism as the culprits.
What is the immediate future of the bankruptcy rate?
Though the future remains unseen, the trend of increased rates of bankruptcy filings will likely continue. The winter months mark the end of tourist season, cutting off an already weakened industry. Business owners, shareholders and executives who face bankruptcy will have to evaluate all their options and determine whether filing Chapter 11 is the best option for their company.