The number of large businesses that have gone bankrupt in 2020 has increased by 84% compared to the same time period in 2019, according to a recent study. This increase in the number of big business bankruptcies is blamed largely on economic disruptions caused by the coronavirus pandemic. This trend goes to show that even very successful companies can still be at serious financial risk when unforeseen circumstances arise.
The Coronavirus and Its Economic Impact
The 2019 novel coronavirus, also known as COVID-19, has resulted in more than nine million infections across the country, and more than 230,000 confirmed deaths. Efforts to contain the coronavirus resulted in extensive quarantine measures that forced many businesses to close, or otherwise limit their operations. As a result, many businesses lost a substantial amount of revenue, enough to endanger their ability to meet their debt obligations.
It is unsurprising, then, that there has been a wave of businesses declaring bankruptcy in the face of the coronavirus pandemic. After all, it is nearly impossible to keep a business going when you are not able to open and sell your products or services to customers. What is surprising, however, is just how many businesses declaring bankruptcy are large businesses with enormous assets.
Who Has Been Affected By These Bankruptcies?
According to the study, 138 companies with more than $100 million in assets have declared bankruptcy thus far in 2020. That is 84% more bankruptcies among similarly situated businesses than the same time period in 2019. Of those 138 big business bankruptcies, 52 of those companies had more than $1 billion in assets. These “mega-bankruptcies” have happened at a higher rate than any year since 2009, when the housing market collapsed.
The study notes that two industries represent more than half of these big business bankruptcies: mining, oil and gas; and retail trade. In the former case, those industries were damaged by a drop off in manufacturing and travel, reducing demand for their products and reducing their profitability. In the latter case, the primary culprit was quarantine restrictions forcing many retail stores to close.
What Does All of This Mean?
This study is a good reminder that just because a business is flush with cash or has many valuable assets does not mean it is not potentially vulnerable to shifts in the economy. The COVID-19 crisis, in particular, has revealed how easily any business, even major businesses, can go from economic giants to filing for bankruptcy over the course of a few months. And although bankruptcies have started to return to their normal rate, predictions of a new shutdown on the horizon have left many businesses worried they may need to seek bankruptcy protection as well.
If you are running a business and you are struggling with paying off your debts, do not be afraid to consider bankruptcy as a potential option. Depending on your financial circumstances, bankruptcy may not only save you from the crushing burden of your debts, but you may even be able to restructure your business to make it more profitable than ever. Do not wait to contact a bankruptcy attorney to consult on your financial options.
If you are a Floridian business owner wondering if bankruptcy is truly in your best interests, you should consult a Florida bankruptcy attorney to help you figure out what works best for you. Please contact the law offices of David Langley at (954) 356-0450 for a consultation about whether bankruptcy may be the right way to address your financial circumstances. The sooner you consult with a bankruptcy attorney, the more quickly you can get on a path towards repairing your finances.