U.S. corporate bankruptcies accelerated this summer. In July 2025, 71 large companies sought court protection—the highest monthly count since July 2020—bringing the year-to-date total to 446 filings through July, according to S&P Global Market Intelligence. On that trajectory, 2025 is likely to surpass 2024’s full-year tally of 688. S&P defines “large” as public companies with at least $2 million in assets or liabilities, and private companies with at least $10 million at filing. Industrial and consumer-discretionary firms account for most cases, with notable filings including LifeScan Global, Del Monte Foods, and Genesis Healthcare.
This spike sits within a broader uptrend in business insolvencies. Federal judiciary statistics show business bankruptcy filings rose 4.5% in the 12 months ended June 30, 2025 (to 23,043), while total filings (business and consumer) climbed 11.5% year over year. At the same time, commercial Chapter 11 activity jumped sharply in July: Epiq reported 911 commercial Chapter 11s, up 78% from July 2024. Small-business cases using subchapter V (a streamlined reorganization route) rose 30% year over year in July to 206 filings. For the first half of 2025, subchapter V elections totaled 1,183, roughly in line with 2024’s pace. These figures confirm that financial stress is not limited to headline-making large companies; it is filtering into the small-business segment as well.
Why this matters for you and for your small businesses seeking bank credit
When bankruptcy risk is on the table—or even when cash flow is simply volatile—traditional bank financing becomes much harder to secure. Banks evaluate both ability to repay and proximity to default events; signs such as aged payables, tax arrears, loan covenant pressure, or pending litigation raise underwriting hurdles. If a borrower is already in Chapter 11, most banks will not extend new unsecured credit; any Debtor-in-Possession (DIP) financing typically requires court approval, liens, tight budgets, and specialized lenders. For small firms that do not meet those formal DIP standards, conventional bank loans are rarely available until after a plan is confirmed and post-petition financials stabilize.
Even outside bankruptcy court, credit standards remain tight by historical norms. The Federal Reserve’s Senior Loan Officer Opinion Survey (SLOOS) reported that, while some categories showed modest easing relative to 2024, standards for business loans remained on the stricter side compared with long-run averages—reflecting banks’ caution amid higher rates and macro uncertainty. Earlier in 2025, the same survey noted tighter standards and weaker loan demand, particularly among small firms. The upshot: distressed or near-distressed small businesses face a narrower window for approval, lower advance rates, and more covenants.
The mechanics of the “credit squeeze” when bankruptcy is possible
- Risk-based pricing and collateral limits. As interest costs rose across 2023–2025, lenders re-priced risk. For companies with stressed cash flow, this translates to higher rates, larger reserves, or additional collateral—often beyond a small firm’s capacity. That dynamic can tip a fragile business toward court protection, feeding the rise in Chapter 11s noted above.
- Structural barriers once a filing is likely. When a filing is contemplated, banks face potential preference exposure and collateral-perfection questions on new advances. Many institutions defer to specialty lenders that can provide court-approved DIP facilities or asset-based structures aligned to post-petition receivables. Small firms without scale or reliable collateral often cannot access these products at bank platforms.
- Tighter monitoring and early exits. Workout groups accelerate action in today’s environment: tighter borrowing bases, quicker defaults on covenant breaches, and reduced willingness to waive issues. That leaves owners seeking non-bank solutions or court protection to buy time.
The numbers in context
The current pace of large-company filings—the highest January-July total since 2010—reflects a cocktail of headwinds: higher borrowing costs, inflation that has pressured margins, and tariff/policy uncertainty weighing on planning. S&P’s classification standard (≥$2 million public / ≥$10 million private in liabilities or assets) captures the segment most likely to ripple into supply chains, where small vendors feel the impact through slower payments and write-offs—which then weakens their credit profiles at banks.
Meanwhile, the broad-based rise in bankruptcy filings from the judiciary’s data underscores that stress is not isolated to a few sectors. Business cases increased in the latest annual period, and consumer filings rose faster—often a warning sign for Main Street demand. For small employers that rely on household spending, that combination can depress revenues exactly when credit becomes harder to obtain.
Finally, the July surge in commercial Chapter 11s and subchapter V cases shows the system absorbing a higher volume of restructurings at both the middle-market and small-business levels—an important signal for brokers, vendors, and lenders calibrating their expectations for the remainder of 2025. Epiq
What small business owners can realistically expect
- New bank credit will be conservative. Expect more documentation, lower lines, and closer monitoring. Firms with recent losses, tax delinquencies, or significant customer concentration may be asked to provide additional guarantees or collateral—if offers are made at all. Fed survey evidence suggests standards remain tight relative to historical norms, even if not worsening quarter-to-quarter. Federal Reserve
- Non-bank working-capital options will carry the load. As traditional credit tightens, owners frequently pivot to asset-based loans, factoring of receivables, inventory finance, purchase-order finance, or equipment financing. These underwrite collateral and verification rather than pure cash-flow strength, making them more accessible when conventional underwriting flags elevated bankruptcy risk.
- If a filing is contemplated, plan the funding path early. For companies with viable operations but a balance-sheet problem, post-petition (DIP) structures—including factoring of new receivables—can supply working cash while a plan is negotiated. These facilities are typically provided by specialized lenders, with court oversight and detailed reporting. Small firms that cannot meet DIP requirements may need to restructure informally with vendors and explore collateral-based financing to avoid a filing.
Takeaways
The data are unambiguous: large-company bankruptcies are running at their fastest pace in five years, and total bankruptcy activity has risen meaningfully over the past year. In that environment, small businesses—especially those near a restructuring—will find traditional bank loans difficult to secure until performance stabilizes and risk metrics improve. Owners should anticipate conservative terms at banks, evaluate collateral-based alternatives, and, where necessary, consult experienced advisors to map out a funding plan that can withstand today’s credit standards.