Rising bankruptcies reflect a tight credit market driven by cautious banks and high rates.
U.S. insolvency filings reached 150,009 in the first quarter of 2026, according to the American Bankruptcy Institute. Small-business filings jumped 67% year over year. Persistent inflation, elevated interest rates, and geopolitical instability are key drivers, but the more immediate constraint is access to credit.
In April, PNC Financial Services CFO Robert Reilly emphasized lending prudence: “We have generated, on a relative basis, much higher volume of higher credit quality deals, which by definition carry relatively lower spreads.”
In February, JPMorgan Chase’s CFO Jeremy Barnum spoke of maintaining discipline, saying, “There’s a lot of demand for financing … but we are not going to compromise on terms to chase share.”
Gates Little, CEO of The Southern Bank Company, has seen this pattern before. “Terms are cyclical, just like the economy,” he said. “When things are booming, banks get aggressive and competition creates looser terms. When things slow down, the banks get conservative.” His clients—staffing agencies, manufacturers, transportation companies—arrive at his door squeezed. Their cash flow is strained by slow-paying customers.
“These are red flags for most banks,” Little said, “so they go hand in hand with denied access to credit.”
Tightening Underwriting Standards
The tightening is visible in the small-business credit market. Ryan Garrido, founder of e-commerce business DropshippingHighTicket.com, has watched underwriting floors shift. “A 680 FICO 8 was enough to land some premium cards in 2020-2022,” he said. “Today the same product wants closer to 720—same card, same issuer.” Starting limits have been followed.
Profiles that generated $25,000 offers two years ago are now seeing $5,000 to $10,000, or denials. “You might still get a yes—just a smaller yes than you expected, with more hoops,” Garrido added.
The current credit squeeze is not uniquely American. The European Central Bank’s fourth-quarter 2025 lending survey showed euro area banks tightening credit standards for business loans due to risk aversion and deteriorating economic outlooks. The Federal Reserve’s next Senior Loan Officer Opinion Survey, due in May, will be the first read on bank behavior since February 2. It may confirm what CFOs are already experiencing: the window is narrower, the standards are higher, and available capital is shrinking — before the bankruptcy data has time to catch up.
This article appears in the May issue of Global Finance Magazine.
