Lefkovitz & Lefkovitz

Nashville Office 615-256-8300       Cookeville Office 931-400-2218

Nashville Office 615-256-8300
Cookeville Office 931-400-2218

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Common reasons small businesses turn to bankruptcy

On Behalf of | Mar 26, 2020 | Chapter 11 |

Tennessee is home to more than 600,000 small businesses, enterprises that account for 99.4% of all businesses within the state. These companies employ 1.1 million people here and help keep the economy chugging along.

Sometimes these hardworking business owners hit a rough patch, where bankruptcy may be the best path forward. What causes this to happen? Here are a few common reasons small businesses end up filing bankruptcy.

Market conditions

The economy is cyclical. Booms and busts, some large and some small, are to be expected over time. These market conditions can impact businesses in different ways. Some companies, particularly if they are dealing with other problems, may hit a lull from which it is too difficult to recover.

Bad luck

Occasionally there are large-scale events that trigger a downturn, regardless of what a business owner did or did not do. For example, an unprecedented storm may destroy a shop owner’s space and inventory, disrupting their income for quite a long time.

Inadequate financing

Loans are critical to many businesses, particularly those in the early stages of growth. Financing can be difficult to find from the outset, when you have a clean slate. If a company runs into some financial trouble, it might be even harder to secure the necessary funds to remain in business.


Sometimes, even the most well-laid plans simply do not work out. Making one decision rather than another becomes a fork-in-the-road moment, with the business unable to find its footing in time.

What you should know about bankruptcy

For most business owners, the thought of shutting down is an agonizing one. That’s why Chapter 11 bankruptcy can be appealing. It is not a magic wand. Going through the process can be tough, requiring some perseverance and discipline as you navigate difficult times.

It can be a solution, however, and a way to set yourself up for the future without sacrificing everything you have built.

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