Is MN Seeing More Business Bankruptcies Due To COVID-19 Loans?

It's been 5 years since the world was turned on its head due to COVID-19. During the pandemic many businesses weren't allowed to operate at full capacity, or had restrictions placed on them. Many businesses folded during the pandemic, and those that didn't may have taken out a loan in order to ride the storm out. Well it seems like those loans were perhaps more hurtful than helpful in the long run to more businesses than we thought.

I grew up in the North Metro, New Brighton. Growing up there were only two flower shops in town, other than the local grocery store, so around the holidays you had a choice to make with where you got your flower arrangements. My choices growing up were Chenoweth Floral or Pletschers' Greenhouse.

Believe it or not, the pandemic affected floral shops like the two I listed from my hometown, all that is left in New Brighton now for flowers are the Pletschers' and our local Cub. So what happened to the other option in Chenoweth? Well, they had to close up permanently and the parent company behind the floral shop has declared bankruptcy, stating they owe more than $3 million, with the top creditor listed being the Small Business Administration.

The owner talked to the Minneapolis/St. Paul Business Journal (paywall) recently about the bankruptcy and what led to it, and it seems like a part of it was the fact that they took an SBA loan during COVID to try to balance the books.

Now, that isn't to say that the SBA loan that was taken out was the main factor, the article from the MSP Business Journal stated that when the business was purchased in 2017, the business was in debt rough $1.5 million dollars. But the SBA loan didn't seem to help matters.

Stories like the one from the Minneapolis-St. Paul Business Journal isn't uncommon. SP Global wrote about the amount of corporate bankruptcies growing in 2024 to the highest level in 14 years. The last time we saw more bankruptcies was at the tail end of the last recession in 2010 when there were 828 corporate bankruptcies filed.

US corporate bankruptcy filings hit a 14-year high in 2024 as filings continued at a steady clip in December 2024 and extended a trend from previous months. - SP Global 

Were all those bankruptcies at the corporate level tied to SBA loans? Probably not, that is ALOT of data to sift through, but I did reach out to the Minnesota Department of Employment and Economic Development for a comment on the current climate, and if they are seeing higher bankruptcy rates compared to past years.

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Here is the response I got from DEED.

DEED doesn’t have the info on bankruptcies but we do have some data on business formation and survivability:

• 67,500 new businesses formed in Minnesota in 2024. This was a nearly 50% increase over 2019.  
• Of the businesses that form in Minnesota, they tend to have a high survival rate. Minnesota ranked 10th nationally, with 54.2% of businesses formed in 2019 surviving until 2024. 
• US News and World Report ranks Minnesota the 4th best state for business, and CNBC ranks MN 6th.

Are you a business that took an SBA loan during the pandemic? I'd love to know how things are going now.