US small business bankruptcies jump 67% as new tariffs hit 80 nations
A shift to permanent US tariffs on 80 nations has coincided with a 67% spike in small business bankruptcies and a record flight to government-backed lending, though analysts disagree on whether the sector is facing a systemic crisis.
On July 24, the Trump administration replaced expiring temporary tariffs with new permanent levies on 80 nations, concluding months of policy volatility that lenders say is straining small business finances.
A new white paper from Crux Analytics highlights a 67% year-over-year jump in small business bankruptcies in the first quarter of 2026, reaching 833 filings. CEO Jacob Bennett attributed the distress to policy "whiplash." “This is really a story about volatility,” Bennett said. “They have basically been operating in an environment where they don’t know how things are going to change, sometimes on a daily basis.”
The financing data reveals a distinct shift in credit markets. The Small Business Administration dispersed a record $45 billion in fiscal year 2025 across more than 84,000 loans, while traditional bank business lending contracted. Crux characterized this as a “flight to government-guaranteed credit,” noting owners are increasingly turning to expensive merchant cash advances and credit cards for emergency capital.
Underlying the credit demand are escalating input costs. A Federal Reserve survey found 77% of small firms cited rising costs as a primary hurdle, with 40% specifically blaming tariffs. Consequently, 56% of firms seeking loans wanted capital for daily operations, compared to 46% looking to fund expansion.
Market professionals, however, push back against the narrative of widespread collapse. Ami Kassar, CEO of SBA broker Multifunding, expects his firm to grow up to 100% this year on the back of heavy loan demand. “This change in tariff policy, I don’t know if it’s going to move the needle that much. I’m skeptical,” Kassar said. He added that the bankruptcy data is skewed because $30,000 to $50,000 filing costs force failing firms to simply close without entering the court system.
Attorney Scott Oliver agreed the cash crunch is real as businesses finance higher inventory costs, but emphasized the distinction between financial strain and fundamental weakness. “I’m not really considering the current environment as one where healthy small businesses are collapsing en masse,” Oliver said.
Peer advisory group founder Rand Larsen echoed this tempered view, noting capital remains accessible even as business owners feel broadly "cautious" and hesitant to spend. “It’s not like they see sunshine and rainbows,” Larsen said. “But nevertheless, their companies are going to grow through it.”
