According to information compiled by Bloomberg, rising interest rates and economic fluctuations are among the main reasons for the increase in business failures in August.
According to a report by data firm Epiq Bankruptcy, commercial bankruptcies rose nearly 17 percent in August compared to July. According to the American Bankruptcy Institute, total bankruptcies, including family and individual bankruptcies, increase throughout the year, pointing to a series of increases spanning 13 months.
In particular, company bankruptcies increased by 54 percent in August compared to the same month of the previous year.
ABI Advisor Ed Flynn emphasizes that interest rates are a major cause of the rise in corporate bankruptcies. “Unusually, we see many large companies going bankrupt,” he says. According to Flynn, increases in interest rates, especially for large firms, cause increased financial difficulties, increasing the likelihood of bankruptcy.
U.S. bankruptcy courts recently received six new major filings involving assets of $50 million, according to data from Bloomberg. This represents a significant increase over the 23 large applications in the previous month.
Last year, the Federal Reserve’s hike in interest rates forced companies to repay their low-cost debt. Because of this, some companies have filed for bankruptcy, blaming rising interest rates. For example, aircraft leasing companies such as Voyager Aviation Holdings, faced with financial difficulties, filed for bankruptcy.
