Running a business in 2025 and 2026 means navigating a minefield of rising costs, tighter credit, and customers who can’t pay on time. Nearly half of all U.S. business-to-business invoices are currently overdue and bankruptcy filings are surging past pre-pandemic levels. The outlook from small business owners is at its most pessimistic since 2020. A new analysis by The Kaplan Group examines the data behind why businesses are struggling, and why collecting debt is getting harder at exactly the wrong moment.
Key Takeaways
- 43% of all U.S. B2B invoiced sales are currently overdue, leaving small businesses that carry unpaid invoices owed more than $17,500 on average.
- U.S. business bankruptcy filings reached 24,737 in 2025, this is 8.6% above pre-pandemic levels and 83.5% above 2022.
- Debt collectors recover just 20 cents per dollar on average, and once an invoice passes 12 months, industry data shows collection probabilities fall to a small fraction of face value, which means delay is never a neutral choice.
Is Business Really Getting Harder Right Now?
The short answer is yes, and the data is nearly universal in saying so. Revenue and employment growth expectations among small businesses fell to their lowest levels since 2020, according to the 2026 Report on Employer Firms released by the 12 Federal Reserve Banks. The revenue expectations index dropped six points year-over-year, from 39 to 33. In a separate Federal Reserve survey of small business resource organizations, over half of respondents reported that small businesses were “somewhat or much less optimistic” about their prospects for revenue and employment growth compared to six months earlier.
The NFIB Small Business Optimism Index fell for the second consecutive month in February 2026, landing at 98.8. The NFIB’s uncertainty gauge, which measures how unsure owners are about the direction of the economy, jumped to 91 in January 2026. The National Small Business Association put a finer point on it: nearly two-thirds of small business owners named economic insecurity as their top challenge in 2025. This is the highest reading for that indicator in 13 years.
Even businesses that held on through the worst of the cost spike are seeing the ceiling close in. Only 24% of small businesses reported an increase in sales over the past 12 months, while 34% reported declining sales. When sales slip and costs rise at the same time, something has to give. For many businesses, what gives is their ability to pay what they owe their own vendors and suppliers, which is exactly how a payment crunch spreads from one firm to the next.
What’s Squeezing Businesses Right Now?
Several cost pressures have converged since 2023 to create what the Federal Reserve describes as sustained financial stress across the small business sector.
Tariffs tripled the import bill for mid-market firms. Tariffs paid by midsized U.S. businesses tripled in 2025. The effective tariff rate on U.S. imports jumped 342% (from 2.2% to 9.75%), generating an estimated $82.3 billion in new costs by July 2025. Over 40% of small businesses in the Federal Reserve’s 2025 Small Business Credit Survey cited increased tariff costs as a direct financial burden.
Separately, among the nearly half of firms that sourced inputs from abroad and faced higher prices on those inputs, 76% passed at least some of those costs on to customers, while 60% absorbed a portion outright. A separate survey of small businesses found that 67% reported higher expenses in the prior quarter, with 60% specifically attributing cost increases to tariffs, and 57% of those businesses saying their costs had risen between 10 and 25%. When margins compress this sharply, payment delays become a survival strategy, not just an oversight.
Borrowing got more expensive and harder to access. The Federal Reserve held its benchmark rate at 4.25–4.5% in March 2025, citing rising uncertainty. While the rate peaked in a 5.25–5.50% range in 2023 and has since come down to the mid-3% range by late 2025, the relief has been incomplete.
Average small business bank loan interest rates ranged from 6.6% to 11.5% in the first half of 2025. The cost of business loans is roughly double what it was in 2021. Meanwhile, lenders have tightened. In the fourth quarter of 2025, 9% of banks tightened lending standards specifically for small business C&I loans. The SBA loan denial rate hit 45% in 2024, and from 2019 to 2023, bank lending to small businesses declined 18% in real dollar terms. Firms that can’t borrow have no buffer when customers pay late.
Rising costs hit 70% of small businesses. In a MetLife and U.S. Chamber of Commerce survey conducted in spring 2025, 70% of small businesses reported that rising prices had impacted their operations, and 60% had already raised their own prices in response. Reaching customers and growing sales was the top operational challenge, a shift from previous years when staffing was the primary concern. Rising costs of goods, services, and wages remained the top financial challenge by a wide margin.
How Bad Is the Late Payment Problem?
The late payment crisis is not new, but it has worsened materially. According to the 2025 Atradius Payment Practices Barometer for the U.S., 43% of all credit-based B2B sales are currently overdue, with payment terms now averaging 45 days from invoicing. The top reason businesses give for not paying on time: customer liquidity issues, cited by 45% of respondents. The second most common reason is delays in the payment process itself (33%).
The consequences ripple outward fast. The 2025 Intuit QuickBooks Small Business Late Payments Report found that small businesses with a higher volume of overdue invoices were 1.4 times more likely to report cash flow problems than those with fewer late payments. Those same businesses were nearly twice as likely to be planning price increases, with average price increases of 16% versus 10% among businesses with healthier receivables. Late payments also drive debt dependency: small businesses more affected by overdue invoices were 1.7 times more likely to be more reliant on credit cards over the prior year, carrying average credit card balances 1.5 times higher than their counterparts.
The problem compounds over time in a well-documented way. Once an invoice ages past 90 days, collection rates drop sharply. Companies that maintain more than 30% of accounts receivable in the 90+ day bucket often experience cash flow shortages severe enough to affect their ability to meet operational expenses and invest in growth. Days Beyond Terms (DBT) — the average number of days invoices are paid past their due date — hit 4 days in August 2025, a 17.9% year-over-year increase. The construction sector averaged 8.15 days beyond terms, pointing to severe cash flow disruptions in one of the largest small-business-dominated industries.
What Do Bankruptcy Numbers Tell Us?
Bankruptcy data are one of the clearest leading indicators of payment risk. When businesses file for bankruptcy protection, creditors often recover only cents on the dollar, if anything.
Annual U.S. business bankruptcy filings reached 24,737 in 2025, the highest total since before the pandemic, and 83.5% above the 2022 trough. Business filings rose 5.6% in the 12-month period ending September 30, 2025 compared to the prior year, according to the U.S. Courts. The upward momentum accelerated into early 2026: in January 2026 alone, commercial Chapter 11 filings hit 956, up 76% from the 544 filings in January 2025. Small business subchapter V elections within Chapter 11 — a restructuring track designed specifically for smaller firms — jumped 68% year-over-year to 255 filings in that same month.
The significance of Chapter 11 is important to understand. Unlike Chapter 7, which liquidates a business, Chapter 11 represents an attempt to restructure debt and keep operating. The surge in Chapter 11 filings — particularly among smaller businesses — means more companies are formally insolvent but still active. They may still be placing orders, requesting services, and running up new payables even while their old debts are being restructured under court supervision. For creditors, that creates a difficult situation: a customer may still look like a going concern while their financial obligations are frozen or reduced by a bankruptcy judge.
The delinquency picture is consistent across commercial loan types. The Federal Reserve reported that the delinquency rate on business loans at commercial banks reached 1.37% in Q4 2025, ticking up from 1.30% the prior quarter. In commercial real estate, CMBS delinquencies climbed to 7.47% in January 2026 — a 17-basis-point jump in a single month. Office properties are the most stressed sector, with CMBS office loan delinquencies peaking at an all-time high of 11.76% before closing 2025 at 11.31% and then reaching a new all‑time high of 12.34% in January 2026.
Why Is Collecting Debt So Much Harder?
Even when a creditor has a legitimate, documented claim, collecting on it has become structurally more difficult. The average debt collection agency recovers approximately 20 cents on every dollar it pursues. When debt ages, recovery rates deteriorate sharply: invoices over 12 months old have roughly a 10% collection probability. That is not a worst-case scenario, it is an average outcome.
A growing share of non-payment reflects genuine debtor financial stress rather than bad faith. The Atradius Barometer found that 45% of U.S. businesses cite their customers’ liquidity issues as the primary reason for late payment. This matters for collections strategy because a debtor who cannot pay is fundamentally different from one who will not. Aggressive collection tactics against genuinely insolvent debtors tend to accelerate their deterioration, reduce eventual recoveries, and generate regulatory friction.
CFPB complaint data illustrates the regulatory dimension. Complaints about debt collection practices nearly doubled from approximately 109,900 in 2023 to 207,800 in 2024, according to the CFPB’s annual FDCPA report. Agencies that rely on high-volume, high-pressure outreach are facing sharply elevated compliance risk at exactly the moment when the volume of delinquent accounts is rising.
Credit tightening adds another layer of difficulty. When businesses can’t access credit to bridge cash flow gaps — and 40% of small businesses report being unable to get the financing they need — they delay payments to vendors as an informal credit facility. That means a creditor’s problem is often not the specific relationship with a given debtor, but the broader tightening of credit across the debtor’s entire supply chain.
Which Sectors Are Most at Risk?
Distress is unevenly distributed, but the industries with the thinnest margins and most trade-dependent supply chains are bearing the heaviest load. Retail and manufacturing firms report the highest rates of tariff-related cost challenges — 69% and 62% respectively, according to the Federal Reserve’s 2025 Small Business Credit Survey. Construction continues to post some of the worst payment timing data, with Days Beyond Terms more than twice the national average. Commercial real estate — particularly office — has seen delinquency rates hit multi-decade highs.
Texas, Florida, California, Georgia, and New Jersey have seen the largest absolute increases in business bankruptcy filings from 2019 to 2025. Texas in particular saw filings rise from 2,429 in 2019 to 4,087 in 2025 — the largest absolute and percentage increase of any state. Every state saw business bankruptcy filings rise between 2022 and 2025.
For businesses that sell on credit to other businesses, the geographic and sector exposure of their customer base is not an abstract concern — it is a direct measure of their default risk.
What Businesses Can Do
The core problem facing creditors right now is a combination of rising delinquency volume, declining recovery probability, and compressing timelines. The data is unambiguous on one point: time is the enemy of collection. Once an invoice reaches 90 days, the probability of full recovery drops significantly. Once it reaches 12 months, the expected recovery is roughly 10%.
Businesses that are most successfully managing this environment tend to share a few practices:
- Act earlier. The most effective collections intervention happens at 30–60 days overdue, not 90+. Waiting for a formal delinquency to develop before escalating almost always reduces recovery odds.
- Assess debtor financial health upfront. With 43% of B2B invoices overdue and customer liquidity the top cited cause, extending credit without evaluating a customer’s financial condition is now a material business risk, not just a credit policy question.
- Know when to outsource. Research from The Kaplan Group shows that companies that outsource more than half of their 90+ day invoices are 3.8 times more likely to achieve 60% or higher recovery rates. Professional collectors bring specialized tools, compliance infrastructure, and negotiating leverage that internal AR teams often lack.
- Document everything. In a high-bankruptcy environment, secured claims and documented written agreements substantially improve recovery position in court proceedings compared to informal arrangements.
- Separate collection from the customer relationship early. Internal teams often avoid escalating overdue accounts to preserve relationships. But a debtor moving toward insolvency is not a relationship worth preserving at the cost of the receivable.
The environment in 2025 and 2026 has not made debt collection impossible. It has made inaction more expensive. Businesses that treat accounts receivable as a passive accounting function — rather than an active risk management discipline — are carrying more exposure than their financial statements reflect.
Sources
Government and Official Data
- Federal Reserve Banks. “2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey.”
- Federal Reserve. “Senior Loan Officer Opinion Survey on Bank Lending Practices – Q4 2025.”
- Federal Reserve, FRED. “Delinquency Rate on Business Loans, All Commercial Banks (DRBLACBN).”
- U.S. Courts. “Bankruptcy Filings Increase 10.6 Percent.”
- U.S. Federal Reserve Small Business. “Findings from a Survey of Small Business Resource Organizations.”
- U.S. Small Business Credit Survey (Federal Reserve). “Small business pandemic recovery hits plateau.”
Trade Associations and Nonprofits
- National Federation of Independent Business (NFIB). Small Business Optimism and Uncertainty Index releases, early 2026.
- National Small Business Association (NSBA). “Economic Survey Data Highlights Small Business Uncertainty.”
- Small Business & Entrepreneurship Council (SBE Council). “New ‘Check Up’ Survey: Resilient 2025 Small Business Performance Fuels Momentum for 2026.”
- Small Business Majority. “Tariffs and Small Business in 2025–2026: Fact Sheet.”
Surveys and Private-Sector Research
- Atradius. “B2B Payment Practices Trends U.S. 2025 – Payment Practices Barometer.”
- Intuit QuickBooks. “2025 U.S. Small Business Late Payments Report.”
- MetLife & U.S. Chamber of Commerce. “Small Business Confidence Inches Up, But Economic Uncertainty Lingers.”
- JPMorgan Chase Institute. Analysis on tariff impacts on U.S. small and midsize businesses in 2025.
Industry and Credit Reports
- Epiq. “Total Bankruptcy Filings Increase 11% in Calendar Year 2025.”
- Trepp. “CMBS Delinquency Rate Increased to Open 2026” and related CMBS office delinquency analyses.
- Mortgage Bankers Association. “Delinquency Rates for Commercial Properties Increased in the First Quarter of 2025.”
- KPMG. “Smaller companies and some consumers lose access to credit: Q4 2025 Fed SLOOS analysis.”
- ResolvePay. “14 Statistics on AR aging >90 days and Write-off Correlations.”
- Clockify. “Late Invoice Statistics You Should Know (2025 Edition).”
The Kaplan Group Research
- The Kaplan Group. “What’s the State of U.S. Business Debt Entering 2026?”
- The Kaplan Group. “Which States Are Driving the New Wave of Business Bankruptcies?”
Additional Industry Analysis and Commentary
- Moveo.ai and other industry sources on debt collection challenges, complaint volumes, and regulatory shifts in 2025–2026.
- CommercialCollectors.com, Procera Group, and related sector pieces on late payments and debt recovery trends in 2025.
- Bill.com. “The 5 payment issues costing SMBs millions in 2025.”
