A Legal Firm Dedicated To


  1. Home
  2.  – 
  3. Business Bankruptcy
  4.  – The reasons businesses actually go bankrupt

The reasons businesses actually go bankrupt

On Behalf of | Jan 6, 2022 | Business Bankruptcy |

When someone sees that a business is going bankrupt, they may assume that it means that the business owner made financial mistakes. They took out too many loans or they spent their money frivolously. That individual may also assume that the business didn’t have good products or services to offer, so they’re not making any money.

While these things do happen, they’re not nearly as common as many outsiders assume. Let’s look at some of the main reasons businesses actually go bankrupt.

It’s not a good location

Some businesses are very dependent on their location. A terrific idea may simply not work if the business is located in an area where people don’t find it or perhaps where the local population can’t afford the goods and services that are being offered.

There is a recession

When there’s an overall economic recession, it can impact all sorts of businesses. This doesn’t mean that the business has done anything wrong, but just that the people don’t have as much money to spend and they have to cut costs somewhere.

Another competitor enters the scene

This is especially a problem for small businesses, which may be put out of business when large big-box stores come in nearby. These stores may even sell their items at such a low price that they almost take a loss until the smaller business has to close its doors, unable to compete at that scale. 

If you decide to file for bankruptcy for one of these reasons or another, make sure you know what steps your business needs to take and what options you have. You may not have to close.