Used Cars Surge as Credit Tightens: The Auto Industry’s Balancing Act

Bankruptcy isn’t just a back-page story anymore, it’s becoming the postscript to the startup surge. The January 27th Experian Commercial Pulse Report reveals a sharp contrast in the small business economy: while business formation remains historically elevated, bankruptcy filings are climbing to levels not seen in a decade. The data points to a critical inflection point—where entrepreneurial growth meets growing financial fragility. Watch The Commercial Pulse Update A Two-Sided Story: Formation and Failure The numbers we see highlighted in the news show a business ecosystem in flux. In December 2025, 497,000 new businesses were launched, a slight dip from November but still 53% above pre-pandemic averages. Since July 2020, an average of 446,000 new businesses have formed each month, underscoring an entrepreneurial surge that has become a defining feature of the post-COVID economy. However, this wave of new businesses comes with significant exposure. Many are lean operations, often led by first-time founders with limited access to capital and minimal financial buffers. These structural vulnerabilities are reflected in rising failure rates. In Q3 2025, business bankruptcy filings hit 24,039—the highest quarterly total since 2016. While some of this activity reflects larger firms restructuring through Chapter 11, a growing share involves smaller, younger businesses taking advantage of Subchapter 5, a newer option tailored for small business reorganization. Understanding Bankruptcy Types: Chapter 7, 9, 11, 12, 13, 15 and Subchapter 5 To better interpret the data, it helps to understand the bankruptcy options available to businesses: Chapter 7 – Liquidation: This is the most straightforward and final form of bankruptcy. Businesses cease operations and a court-appointed trustee sells off assets to repay creditors. Chapter 9 – Municipal Bankruptcy: Exclusively municipalities ( i.e. cities, counties, school districts.) Municipality retains control. No liquidation allowed. No need for disclosure statements. Chapter 11 – Reorganization: This allows a business to continue operating while restructuring its debt under court supervision. Often used by larger or financially complex companies. Chapter 12 – Family Farmer & Fisherman Reorganization: Exclusively for agriculture and fishing operations. Lower cost compared to Chapter 11. Owners keep farm/fishing operation. No need for disclosure statements or creditor committees. Chapter 13 – Individual Reorganization: Primarily for individuals but sometimes used for sole proprietors. Establishes 3 to 5-year repayment plan. Debtor keeps assets and continues operations. Debt limits apply. Chapter 15 – Cross-Border Insolvency: For businesses with assets and creditors in multiple countries. Facilitates cooperation between U.S. courts and foreign courts. Helps protect U.S. assets during international restructuring Subchapter 5 (of Chapter 11): Introduced by the Small Business Reorganization Act of 2019, Subchapter 5 simplifies and lowers the cost of reorganization for small businesses with less than $3 million in debt. Key advantages of Subchapter 5 include: No creditor committee or disclosure statement required Faster court timelines and higher plan confirmation rates Owners can often retain equity Subchapter 5 filings have more than doubled since 2020 and now account for a growing share of all Chapter 11 activity. Who’s Filing—and Why It Matters The report highlights a shift in the types of businesses filing for bankruptcy. These firms are: Small – fewer than five employees Young – under 10 years in operation Low-revenue – earning under $1 million annually These groups now represent the majority of business bankruptcies, showing that financial fragility is highest among the newest and smallest entrants in the market. Early Warning Signs: Commercial Credit Behavior Experian’s commercial credit database reveals clear behavioral patterns among at-risk firms: Higher credit seeking activity: These businesses are 3–4 times more likely to apply for credit before filing. Elevated commercial credit balances: They carry significantly higher balances than non-filing peers. Signs of financial stress: Increased delinquencies and utilization often appear months before a bankruptcy event. This creates an opportunity for lenders to proactively monitor portfolios and identify risk earlier, especially among firms that fit the high-risk profile. What This Means for the Small Business Economy The data paints a complicated picture. New business creation remains strong, driven by structural changes and a resilient entrepreneurial spirit. But these new firms are operating in an increasingly challenging environment, facing inflation, tighter credit conditions, and weakening demand. Subchapter 5 is helping many small businesses stay afloat by making reorganization more accessible. However, rising filings among small and young firms signal that financial strain is becoming more common at the foundational level of the economy. For lenders and risk professionals, the takeaway is clear: track not just the volume of small business activity, but the quality and sustainability behind it. Credit signals remain a powerful early indicator of distress and can help institutions support their small business clients more strategically. Learn More ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis. ✔ Subscribe to our YouTube channel for regular updates on small business trends. ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow. Download the Commercial Pulse Report Visit Commercial Insights Hub Related Posts

In the just-released Experian Commercial Pulse Report, we focus on a growth small business sector – Education Services, which enjoys healthy, consistent formation, and stable credit management. For Chief Risk Officers navigating an uncertain lending landscape, the question isn't just where growth is happening—it's where growth aligns with manageable risk. The Education Services sector presents exactly that combination, and the numbers tell a compelling story that contradicts conventional wisdom about small business exposure. Watch The Commercial Pulse Update A Sector Transformation Driven by Economic Realities The fundamentals driving Education Services' growth aren't temporary market anomalies; they're structural shifts in how young adults approach career preparation. With youth unemployment rates persistently running more than twice the general population, and young workers facing heightened job security concerns, the demand for skills-based training has fundamentally changed. The traditional four-year degree path is losing its popularity. While bachelor's degree holders still experience lower unemployment rates than those with associate's degrees, the gap has narrowed considerably in recent years. Meanwhile, the escalating cost of traditional college education is accelerating a pivot toward trade schools and specialized training programs, a trend reflected in rising post-secondary enrollment, particularly in trade education. This isn't speculation. Through November 2025, nearly 76,000 new education services businesses have opened— with 7,653 opening in November, the highest level on record. This represents a 205% increase in just two decades. Employment in the sector crossed 4 million for the first time in July 2025. These aren't vanity metrics; they signal sustained, fundamental demand. The Small Business Concentration: Risk or Resilience? Here's where traditional risk models might flash warning signals: businesses with fewer than 10 employees now represent nearly 80% of all educational services firms, up from 63% in 2019. For most sectors, such a high concentration of small businesses would trigger heightened scrutiny and tighter credit controls. But Education Services is defying that conventional risk calculus. Despite this shift in concentration toward smaller operators, credit performance metrics tell a different story—one of discipline and stability that should inform how risk leaders approach this segment. Credit Performance That Challenges Assumptions The credit behavior within Education Services reveals patterns that warrant a fresh risk assessment framework. Commercial credit cards dominate the sector, representing over 78% of monthly originations—a preference that actually provides lenders with valuable visibility into cash flow patterns and working capital management. What's particularly noteworthy: while many industries have experienced tightening credit limits over the past several years, average commercial card limits in Education Services have increased 23% since 2019, now exceeding $19,000. This expansion isn't resulting in overleveraged borrowers. Utilization rates remain relatively low, and average commercial credit scores have held stable throughout this rapid expansion phase. This combination, expanding credit access paired with stable utilization and consistent credit performance, signals something important: disciplined financial management even among newer, smaller operators. For risk leaders, this should prompt a critical question: are your current underwriting models properly calibrated to identify opportunity in this segment, or are they applying broad small business assumptions that miss sector-specific strength signals? Strategic Implications for Risk Leaders The Education Services growth story presents three strategic imperatives for Chief Risk Officers: First, industry-specific risk strategies deliver differentiated insight. Blanket approaches to small business risk assessment will systematically underprice opportunity in sectors like Education Services while potentially overexposing you elsewhere. The stable credit performance despite small business concentration demonstrates that sectoral dynamics matter more than size alone. Second, continuous monitoring beats static underwriting. The rapid composition shift in Education Services—from 63% to 80% small business concentration in just six years illustrates how quickly sector profiles can evolve. Risk strategies built on outdated sector snapshots will either miss growth opportunities or accumulate unrecognized exposure. Real-time portfolio monitoring and dynamic risk modeling aren't optional anymore. Third, growth doesn't automatically mean elevated risk. The Education Services sector challenges the reflexive association between rapid expansion and deteriorating credit quality. In this case, expansion has coincided with improving credit access and stable performance. The key differentiator? Understanding the fundamental demand drivers and recognizing when growth is structural rather than speculative. The Broader Context: Skills-Based Economy Acceleration Education Services isn't growing in isolation. It's responding to, and enabling, a broader economic transformation toward skills-based career pathways. As this transformation accelerates, the sector's role becomes increasingly central to workforce development, suggesting sustained long-term demand rather than cyclical opportunities. For financial institutions, this means Education Services represents more than a near-term growth play. It's a sector aligned with multi-year economic trends, serving businesses that fill a critical gap in how workers prepare for evolving job markets. Moving Forward The Education Services sector demonstrates that growth opportunities and manageable risk profiles can coexist, when you have the right analytical framework to identify them. For Chief Risk Officers, the question is whether your institution's risk infrastructure can recognize these nuances or whether you're leaving opportunity on the table. As 76,000 new businesses enter this sector and credit performance remains stable, the window for strategic positioning won't remain open indefinitely. Competitors with more sophisticated sector-level risk analytics will identify and capture these borrowers first. The data is clear. The opportunity is measurable. The question for risk leaders is simple: what's your strategy for Education Services? ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis. ✔ Subscribe to our YouTube channel for regular updates on small business trends. ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow. Download the Commercial Pulse Report Visit Commercial Insights Hub Related Posts

Experian Commercial Pulse Report Explores Implications of Rising Premiums As the year draws to a close, one issue looms large for millions of small business owners: the rising cost of healthcare. According to the latest Experian Commercial Pulse Report, small business survival may soon hinge on a single factor — whether enhanced Affordable Care Act (ACA) subsidies are extended into 2026. Watch the Commercial Pulse Update The Clock Is Ticking on ACA Subsidies The American Rescue Plan and Inflation Reduction Act temporarily expanded ACA subsidies, helping make coverage more affordable for millions. But those enhancements are set to expire at the end of 2025 — a policy shift that could unleash a wave of economic strain. The Kaiser Family Foundation estimates that if these subsidies lapse, individuals who purchase insurance through the ACA marketplace could see a 75% increase in premiums. Why does this matter so much for small businesses? Because half of all ACA marketplace enrollees are small business owners, entrepreneurs, or their employees. Coverage Is Shrinking, and Costs Keep Climbing Smaller businesses have historically been less likely to offer health insurance benefits than their larger counterparts. In 2025, only 64% of businesses with 25 to 49 employees offer health benefits — the lowest level ever recorded. And while large employers are still required by the ACA to offer coverage to full-time workers, they too are feeling the pressure. Since 2010, employers have gradually reduced the share of healthcare premiums they cover, even as deductibles have risen by 164% for single coverage plans. The result? Business owners are being squeezed from both sides — by rising insurance costs and a more financially stressed workforce. The Ripple Effects Could Be Widespread If enhanced subsidies aren’t renewed, many small businesses may have no choice but to: Shut down operations Cut staff Shift jobs into larger organizations that can offer coverage That would be a blow not only to small business dynamism but also to broader economic sectors. Reduced consumer spending could hit industries like retail, real estate, and manufacturing, while healthcare providers face payment cuts and job losses due to shrinking coverage pools. What’s Next? With Congress set to vote on subsidy extensions before the end of the year, the stakes couldn’t be higher. The outcome will likely define affordability, access, and entrepreneurship for years to come. For small business owners, now is the time to assess your coverage plans, understand your employee needs, and prepare for potential cost increases. For policymakers and industry leaders, it’s a critical moment to ensure healthcare reforms continue to support the backbone of the U.S. economy — small businesses. Experian continues to provide actionable data to help businesses, lenders, and policymakers navigate uncertainty. To access the full Commercial Pulse Report and explore more insights on small business credit and sector-specific performance: ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis. ✔ Subscribe to our YouTube channel for regular updates on small business trends. ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow. Download the Commercial Pulse Report Visit Commercial Insights Hub Related Posts