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National Analysis Reveals Myriad of Small Business Bankruptcy Trends

Press release from the issuing company

Thursday, August 25th, 2011

While better days may be on the horizon for the commercial bankruptcy market, it remains to be seen if recent trends will continue for the nation's more than 24 million small businesses. According to a national study conducted byEquifax Inc., small business bankruptcies declined by 15.32 percent from Q1 2010 to Q1 2011, with a noticeable drop in key Western states. However, total U.S. small business bankruptcies in the first quarter of this year are still 30.03 percent higher than reported in the pre-recession period of Q1 2008. Further analysis by Equifax reveals that while small business bankruptcy rates have decreased in many U.S. regions, the pace of decline could be slowing in key areas when analyzing trends from Q3 2010 to Q1 2011.

To conduct this study, Equifax analyzed national bankruptcy trends by metropolitan statistical area (MSA) during Q1 2011 and compared these findings to previous timeframes. Equifax data shows that in Q1 2011 nine of the top 15 MSA's with the greatest number of small business bankruptcies experienced a year-over-year decline in business failures from Q1 2010. In fact, key MSA's inCaliforniaandOregon, which reported record-high small business bankruptcy numbers in Q2 2009, saw double-digit dips from Q1 2010 to the first quarter of this year. TheDenver/Aurora, ColoradoMSA reported the biggest drop, with a 26.16 percent decrease in bankruptcy petitions during this time period. While these findings represent a positive development for the small business market, the data must be viewed using a wider lens to assess broader trends. As the table below shows, small business bankruptcies are still at levels that far exceed those of pre-recession periods, especially for Western region MSA's.


MSA

Bankruptcy Total Q1/08

Bankruptcy

Total Q1/10

Bankruptcy

Total Q1/11

% of Change Q1/08 – Q1/11

% of Change Q1/10 – Q1/11

Los Angeles-Long Beach -Glendale, CA

505

1032

1048

107.52%

1.55%

Riverside-San Bernardino -Ontario, CA

295

720

629

113.22%

-12.64%

Sacramento-Arden-Arcade –Roseville, CA

291

486

434

49.14%

-10.70%

San Diego-Carlsbad-San Marcos, CA

208

391

400

92.31%

2.30%

Houston-Sugar Land-Baytown, TX

242

396

363

50.00%

-8.33%

Santa Ana-Anaheim-Irvine, CA

156

356

328

110.26%

-7.86%

Portland-Vancouver-Beaverton, OR-WA

144

370

320

122.22%

-13.51%

California – Rest of State

161

314

315

95.65%

0.32%

Dallas-Plano-Irving, TX

196

319

295

50.51%

-1.88%

New York-White Plains-Wayne, NY-NJ

232

266

277

19.40%

4.13%

Chicago-Naperville-Joliet, IL

218

300

272

24.77%

-2.67%

Denver-Aurora, CO

216

367

271

25.46%

-26.16%

Oakland-Fremont-Hayward, CA

163

239

266

63.19%

11.30%

Oregon-Rest of State

107

286

238

122.43%

-16.78%

Unknown

245

195

236

-3.67%

21.02%

Total

3379

6037

5692

68.45%

-5.71%

*Note, the group Unknown refers to zip codes that are not related to a specific MSA.
Despite some improvement in small business bankruptcy rates during Q1 2011, it appears that another trend has developed in select regions and may be overshadowing market gains in the commercial landscape. Equifax data shows that when comparing bankruptcy rates from Q3 2010 through Q1 2011, there has been a modest deceleration in the rate of decline for key MSA's reporting some of the highest small business bankruptcy rates in the country. While 60 percent of these MSA's continued to experience a decrease in small business bankruptcy petitions during both the Q3 2010 to Q4 2010 and Q4 2010 to Q1 2011 timeframes, three of these areas saw a significant drop in the rate of decline from Q4 2010 to the first quarter of this year. They include theRiverside/San Bernandino/Ontario,Santa Ana/Anaheim/Irvineand Oregon-Rest of State MSA's. Also signaling a potential shift in small business bankruptcy trends is the rise in petitions within four key MSA's:Sacramento/Arden/Arcade, California-Rest of State,New York/White Plains/Wayne, NY-NJ andChicago/Naperville/Joliet, IL.While bankruptcies in all of these areas have consistently declined since Q2 2009, Equifax data revealed that the number of petitions in each of these MSA's jumped from Q4 2010 to the first quarter of this year. The table below provides a closer look at these trends:

MSA

Bankruptcy

Total Q3/10

Bankruptcy

Total Q4/10

Bankruptcy

Total Q1/11

% of Change

Q3/10 – Q4/10

% of Change

Q4/10 – Q1/11

Los Angeles-Long Beach -Glendale, CA

1112

1242

1048

11.69%

-15.62%

Riverside-San Bernardino -Ontario, CA

844

659

629

-21.92%

-4.55%

Sacramento-Arden-Arcade –Roseville, CA

476

409

434

-14.07%

6.11%

San Diego-Carlsbad-San Marcos, CA

376

389

400

3.46%

2.83%

Houston-Sugar Land-Baytown, TX

378

444

363

17.46%

-18.24%

Santa Ana-Anaheim-Irvine, CA

445

387

328

-13.03%

-15.24%

Portland-Vancouver-Beaverton, OR-WA

371

333

320

-10.24%

-3.90%

California – Rest of State

348

293

315

-15.80%

7.51%

Dallas-Plano-Irving, TX

337

318

295

-5.64%

-7.23%

New York-White Plains-Wayne, NY-NJ

304

267

277

-12.17%

3.74%

Chicago-Naperville-Joliet, IL

322

264

272

-18.01%

3.03%

Denver-Aurora, CO

414

367

271

-11.35%

-26.16%

Oakland-Fremont-Hayward, CA

294

291

266

-1.02%

-8.59%

Oregon-Rest of State

274

249

238

-9.12%

-5.22%

Unknown

409

363

236

-11.25%

-34.99%

Total

6704

6275

5692

-6.40%

-9.29%

*Note, the group Unknown refers to zip codes that are not related to a specific MSA.

"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," said Dr.Reza Barazesh, senior vice president,Equifax Commercial Information Solutions. "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. Only time will tell if these patterns are just a market aberration resulting from current economic turbulence or a sign of change to come."

To gain a holistic picture of small business bankruptcy trends, Equifax also analyzed the 15 metro areas with the fewest filings in the first quarter of 2011. Equifax analysis revealed that 10 of these 15 MSA's saw a decline in bankruptcy petitions from Q4 2010 to Q1 2011 and the total number of bankruptcy filings for these 15 metro areas decreased by 43.09% in Q1 2011 year-over-year. As the table below shows, all of these MSA's reported 9 bankruptcies or less during Q1 2011.


MSA

Bankruptcy Total Q1

2010

Bankruptcy Total Q4

2010

Bankruptcy Total Q1

2011

Baton Rouge, LA

10

9

9

Alaska – Rest of State

12

11

9

Norwich, New London, CT

11

14

8

Kingsport- Bristol TN-VA

13

8

8

Hagerstown-Martinsburg, MD-WV

4

18

8

Amarillo, TX

11

8

8

Toledo, OH

23

10

7

Fort Smith, AR-OK

14

17

7

Charleston, WV

8

8

7

Lynchburg, VA

13

3

6

Lakeland, FL

15

12

6

Clarksville, TN-KY

17

11

6

Gulfport-Biloxi MS

12

9

5

Gainesville, Fl.

6

5

5

South Bend-Mishawaka, IN-MI

12

5

4

Total

181

148

103