Small Business Bankruptcies Retreat – But Not Everywhere

Small business bankruptcies have declined in 11 of the 15 metropolitan areas with the nation’s highest filing rates, according to a new study conducted by Equifax. That fueled a 4.4% drop in filings overall in those areas during the third quarter of 2010 when compared with the same period during 2009.

Small businesses in the Atlanta and Chicago areas saw the sharpest year-over-year decreases: 26.75% and 16.67%, respectively. The number of businesses filing for bankruptcy in the Dallas, Texas, region declined more than 15%, while the San Diego, Sacramento, and Oakland metro areas in California all experienced double-digit drop-offs.

Things weren’t so sunny elsewhere in California, especially in the southern part of the state. Small businesses bankruptcies in the Los Angeles area — already tops in the nation, according to the Equifax data — rose 4.57% year-over-year. 1,099 businesses there initiated bankruptcy proceedings in the third quarter of 2010, bringing the total number to 3,338 during the first nine months of this year. That’s a 14.24% spike for the City of Angels compared with the first nine months of 2009.

Los Angeles’s neighbors didn’t fare much better: The Q3 2010 bankruptcy rate for small businesses in the Riverside-San Bernardino-Ontario area, which was particularly hard hit by the sub-prime mortgage crisis, jumped more than 10% year-over-year. The Santa Ana-Anaheim-Irvine area, also in southern California, had a tough year, too, with its 2.64% increase in filings.

Comparing the Q3 data year-over-year puts the numbers in a brighter light than looking at them cumulatively over the first three quarters of 2010. When compared with the same period in 2009, nine of the 15 metro areas with the highest rates of small business bankruptcy showed increases this year. There was, however, an overall decrease of 1.23% across these areas.

On the other end of the spectrum, 10 of the 15 metro areas with the smallest number of small business bankruptcies had an even smaller number of filings in Q3 2010, both compared year-over-year and with Q2 2010. None of the areas on the list — from Lynchburg, Virginia, to Amarillo, Texas — registered more than 11 small business bankruptcies in Q3 2010.

Equifax, one of the three primary credit-reporting agencies in the U.S., defined a small business as having 100 or fewer employees. The study, intended as a temperature check of the nation’s overall business health, monitored Chapter 7, 11, and 13 filing data from Q3 2009 to Q3 2010.

About Kevin Casey

Kevin Casey is a regular contributor here, at InformationWeek and elsewhere. Find him on Twitter @kevinrcasey.
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