Wednesday, April 13, 2011

Does the Bankruptcy Code Provide a Fresh Start To Entrepreneurs?

The U. S. bankruptcy system is designed to recover funds for creditors while giving bankrupt small businesses an opportunity for a “fresh start.” While a fresh start is a goal of the system, little analysis has been done to evaluate the ability of small firms to reset and thrive after bankruptcy. This paper attempts to fill that gap. The research finds that 2.6 percent of firms filed for bankruptcy within the previous seven years, that they are comparable to other firms in terms of cash flow and firm size, and that they have a 24 percent higher likelihood of being denied a loan and are charged interest rates that are 1 percent higher than those charged other firms.

The research summary can be found HERE.

Should you need further information, please feel free to contact Brian Headd at (202) 205-6533 or advocacy@sba.gov.

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