Why Small Businesses Are Struggling Right Now—and What the Data Is Telling Us
If you want to understand where the economy is headed, don’t start with the stock market. Start with small businesses. Right now, they’re sending up warning flares.
One of the clearest signals is coming from a part of the bankruptcy code most people have never heard of: Subchapter V. This program was created to help small business owners restructure debt and keep their doors open. Lately, though, it’s being used at record levels—and far too often as a way to shut down, not survive.
The rules originally applied to businesses with several million dollars in debt. Even after the threshold was lowered, filings kept climbing. That tells you something important. Owners aren’t using this option because it’s convenient. They’re using it because they’re running out of room to maneuver.
The Jobs Data Tells the Same Story
The latest ADP employment numbers back this up. While overall job losses weren’t catastrophic, the most troubling trend shows up where it matters most: small businesses are still cutting jobs.
That’s not a side issue. Small businesses have always been the engine of job growth in this country. They’re the ones that hire when times are good and innovate when conditions change. When they pull back, it usually means stress is building beneath the surface of the economy.
And that stress isn’t coming from one place. It’s piling up.
Tariffs and Uncertainty Take a Toll
Tariffs have been especially hard on small businesses. Large corporations can negotiate, shift suppliers, or absorb higher costs. Small businesses don’t have that flexibility. When input costs rise, margins get squeezed fast.
On top of that, uncertainty makes planning harder. Owners hesitate to hire when they don’t know what costs will look like six months from now. Even when some prices—like gasoline—start to come down, the relief is often offset by higher expenses elsewhere, from insurance to groceries to compliance costs.
Regulations That Keep Moving the Goalposts
For many small business owners, regulation isn’t just a burden—it’s a moving target. If the rules stayed the same, owners could adapt. But when regulations shift, expand, or change interpretation, it becomes much harder to operate with confidence.
Think of it like crossing a minefield. If you know where the mines are, you can navigate it. But if they move overnight, every step becomes more dangerous and more expensive. That’s the reality many small businesses face.
Large corporations can handle that kind of environment. In some cases, it even works to their advantage. Small businesses and startups don’t have that luxury, and the result is fewer competitors and less innovation.
Why This Matters Beyond Small Business Owners
When small businesses struggle, the effects ripple outward. Employees lose jobs. Communities lose local services. Competition shrinks. Over time, economic power becomes more concentrated, and the economy becomes less flexible.
The rise in Subchapter V bankruptcies and continued small business layoffs aren’t isolated developments. They’re early warning signs.
What This Means for Investors
At Markowski Investments, we pay close attention to signals like these. Markets can move on headlines in the short term, but long-term outcomes are driven by fundamentals. Employment trends, business health, and cost pressures matter.
Small business weakness often shows up before broader economic slowdowns. That’s why discipline, diversification, and risk management become even more important during periods of uncertainty.
Where Things Go from Here
If policymakers want a stronger economy, small businesses need to be part of the focus. That means reducing unnecessary regulatory burdens, easing tariff-related pressures, and providing clearer, more predictable policy signals.
The data is already speaking. Rising bankruptcies and layoffs are telling a story about stress in the real economy. The question now is whether anyone is willing to listen—and act—before the damage becomes harder to reverse.
