Key Findings

• AI/ML adoption in the debt collection industry surged from 49% in 2023 to 93% in 2025.
• The global AI debt collection market is valued at approximately $2.80 billion in 2025, projected to reach $11.38 billion by 2035 at a CAGR of ~15%
• Virtual negotiator and AI-powered self-service adoption jumped 35 percentage points in a single year, reaching 64% of the industry in 2025

The Growing Adoption of AI in Debt Collection

The pace of AI adoption in collections has been remarkable by any standard. According to TransUnion’s seventh annual Debt Collection Industry Report AI/ML use went from 49% of firms in 2023, to 73% in 2024, to 93% in 2025. Only 7% of companies now report no plans to deploy AI or machine learning, a dramatic reversal from a landscape where adoption was clearly the exception.

The market is growing at a pace that reflects this surge in demand. The global AI debt collection market is valued at approximately $2.80 billion in 2025 and is projected to reach $11.38 billion by 2035, expanding at a compound annual growth rate of roughly 15%. This rate is far outpacing the overall debt collection market, which is growing at approximately 2–3% annually. North America leads adoption, accounting for roughly 31% of the global market.

The business conditions driving adoption are straightforward. 64% of collection companies reported increased account volume in the past 12 months, while collectability is simultaneously declining, only 39% reported improved liquidity. Nearly half of firms identified increasing agent productivity and improving margins as the primary motivation for their technology spending.

How AI Improves Debt Collection Efficiency

Predictive scoring models analyze debtor data to identify high-probability repayment cases, flag accounts likely to self-resolve without active outreach, and recommend the optimal timing and channel for each contact. McKinsey’s research on gen AI in collections finds organizations can achieve up to a 40% reduction in operational expenses and approximately a 10% improvement in recoveries through these capabilities. Separately, McKinsey’s research on digital-first collections strategies has documented reductions in non-performing loans of 20–25% among leading institutions.

The most dramatic single shift in the past year is the rise of virtual negotiators. AI-powered self-service tools that can set up payment plans, arrange autopay, and negotiate reduced-balance settlements without human involvement saw their adoption jump 35 percentage points in a single year, reaching 64% of the industry. More broadly, 98% of organizations now offer at least one digital self-service capability, up from about 87% just a year earlier.

No AI Exemption Under Federal Law

The CFPB’s regulatory position is unambiguous: AI systems in collections are subject to the same FDCPA, Regulation F, TCPA, and UDAAP standards as human agents. There is no regulatory exemption for automated or AI-driven communication. Organizations are expected to document AI decision-making processes, test for disparate impact, and maintain audit trails for consumer-facing interactions.

With federal enforcement activity reduced under the current administration, states have stepped up aggressively. This is one of the most significant new developments since our prior analysis. Key 2025–2026 developments include:

• California’s Debt Collection Licensing Act (DCLA) took effect July 1, 2025, requiring all collectors to be licensed by the DFPI; separately, SB 1286 extended state consumer collection protections to commercial debts up to $500,000
• Virginia enacted the Medical Debt Protection Act (effective July 2026), capping interest on medical debt and restricting collection actions
• Maryland and Maine banned medical debt from consumer credit reports entirely
• Utah’s SB 226 narrowed the state’s existing AI disclosure requirements to focus on high-risk interactions involving sensitive personal information or significant financial, legal, or medical decisions, while affirming that AI use is not a defense against consumer protection violations
• In 2025, all 50 states introduced AI-related legislation for the first time, with 145 bills enacted into law. As of March 2026, lawmakers in 45 states had already introduced more than 1,500 additional AI-related bills, with legislative sessions still underway.
• More than 800 privacy-related bills were introduced nationwide in 2025 alone, many with direct implications for how agencies manage data and communicate with consumers. The result is a patchwork compliance environment that makes AI governance infrastructure more important, not less.

The Road Ahead

The collections industry’s AI trajectory points in three directions simultaneously.

• Autonomous resolution will expand. Virtual negotiators that today handle payment plans and autopay setup are evolving toward full account resolution for routine cases. 40% of organizations plan to add or expand chatbots and virtual assistants in the next two years.
• Compliance infrastructure will become a baseline expectation rather than a premium add-on. Real-time regulatory monitoring, automated contact-frequency enforcement, and AI audit trails will be standard requirements as state-level rulemaking accelerates.
• Workforce redeployment, not replacement. The share of collection companies rating hiring as “very or extremely challenging” dropped from 62% in 2024 to 48% in 2025, partly as AI absorbs routine volume. The net effect is not workforce reduction, but a redeployment toward the work that requires judgment, expertise, and empathy. That balance is where the most effective agencies, and the most effective commercial collectors, will continue to differentiate.

Methodology

This study draws on four primary sources:

• TransUnion’s seventh annual Debt Collection Industry Report (Investing for Impact, 2026), a survey of 200+ collection professionals
• The CFPB’s Fair Debt Collection Practices Act Annual Report 2025, the primary federal source for complaint and enforcement data
• McKinsey & Company’s published research on AI in collections operations, widely cited in peer industry analysis
• Harvard Business Review Modernizing Debt Collection through AI and Emotional Intelligence (2025), which provides qualitative and case-level evidence on AI implementation outcomes.

Market sizing data is drawn from Precedence Research and Technavio’s respective 2025 AI for Debt Collection Market analyses. Regulatory and state-level data is sourced from Goodwin Law’s Key Trends of 2025 in State Legislation Impacting Consumer Financial Services (January 2026), Receivables Info’s States Continue to Expand Privacy and Debt Collection Laws (April 2026), and TransUnion’s Form 10-K (February 2026). All data points are cited to their closest available primary or authoritative secondary source.

The post How AI Is Transforming Debt Collection appeared first on The Kaplan Group.

Key Takeaways

• From Fiscal Year 2021 to 2025, total compliance actions fell by about 27.9%, but total back wages rose by roughly 18.5%.
• During that period, civil money penalties increased by more than 180%, pushing back wages per action to about $14,875 and CMPs per action to about $4,060.
• Over Fiscal Year 2013 to 2025, Construction, Food Services, and Health Care together accounted for roughly $1.41 billion in back wages, making them the largest chronic wage‑liability industries in the dataset.

Five-year trend: fewer cases, higher dollar impact

From FY 2021 to FY 2025, total compliance actions across the industries fell from 18,242 to 13,147, a decline of about 27.9%. Over the same period, total back wages increased from about $165.0 million to about $195.6 million, an increase of roughly 18.5%.

Civil money penalties (CMP) rose even faster. CMPs increased from about 19.0 million dollars in FY 2021 to about $53.4 million in FY 2025, a jump of approximately 180.9%. Back wages per compliance action increased from about $9,047 in FY 2021 to about $14,875 in FY 2025, while CMPs per action rose from about $1,042 to about $4,060 over the same period.

In practical terms, enforcement became less frequent but more expensive. A company may be less likely to face an action than in prior years, but when it does, the financial hit is more likely to be large enough to affect cash flow, vendor payments, and debt repayment.

Industries With the Largest Back Wages

Across the full FY 2013–FY 2025 period, wage-liability exposure is heavily concentrated in a few large, labor-intensive industries. Construction led with about $525.2 million in back wages over that period, followed by Food Services at about $477.0 million and Health Care at about $407.3 million.

Together, these three industries accounted for roughly $1.41 billion in back wages. They combine large workforces with significant enforcement activity, creating both frequent and costly cases that can influence payment behavior when liabilities come due.

FY 2013–FY 2025 wage enforcement by industry

The long-term data points to two different types of risk. Industries like Construction, Food Services, Health Care, and Retail show large cumulative exposure because they combine high employment footprints with a large number of enforcement actions.

Other industries, such as Temporary Help, Animal Processing, Utilities, and Warehousing, may generate fewer total cases but show very high dollar exposure per action, which can be more destabilizing for individual employers.

Where Wage-liability Pressure is Highest Now?

Looking only at FY 2025, the largest back-wage totals were again concentrated in a handful of sectors. Health Care recorded the highest back wages in the dataset at about $53.3 million, followed by Construction at about $43.4 million and Food Services at about $42.7 million. Together, these three industries accounted for roughly $139.4 million in FY 2025 back wages. 

FY 2025 wage enforcement by industry

The FY 2025 data also shows why a simple ranking by total back wages does not tell the whole story. Temporary Help, for example, ranked sixth by total FY 2025 back wages but had only 129 compliance actions, producing an average of about $65,831 in back wages per action, the highest that year. Animal Processing had only 69 compliance actions but generated about $4.4 million in back wages and about $2.2 million in CMPs, working out to about $63,451 in back wages per action and 31,241 dollars in CMPs per action.

Why Does this Matter for Collections?

For collection agencies and credit departments, wage enforcement data is useful because it offers another way to think about payment risk beyond traditional financial statements. A wage-and-hour enforcement action can create immediate liquidity pressure, as businesses may suddenly need to pay back wages, penalties, attorneys, consultants, or payroll-system upgrades.

If the company is already operating on thin margins, those costs can affect vendor payments and receivables in the near term. This does not mean every company in a high-risk industry is a poor credit risk, but it does suggest that certain sectors may deserve closer monitoring, more careful payment terms, or faster follow-up when invoices become past due.

Methodology

This analysis is based on the U.S. Department of Labor’s “Low Wage, High Violation Industries” dataset covering FY 2013 through FY 2025. The dataset reports industry-level totals for compliance actions, back wages, employees receiving back wages, and civil money penalties assessed by the Wage and Hour Division.

Per-action figures were calculated by dividing back wages or CMPs by the number of compliance actions in each industry-year, and per-worker figures were calculated by dividing back wages by the number of employees receiving back wages. Dollar figures are rounded to the nearest whole number or million for readability; as a result, some percentages and subtotals may not add up precisely.

The post Are Fewer Wage Disputes Adding Up to Bigger Payouts? appeared first on The Kaplan Group.

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.”

The post Why Collecting What Small Businesses Are Owed Has Never Been Harder? appeared first on The Kaplan Group.

A new report by The Kaplan Group looks at how extended payment terms for agencies combine with widespread late payments to freelancers and new legal protections, creating a “trickle‑down debt” problem across the entire marketing ecosystem.

Key Takeaways

• Contractors now account for 30% to 70% of marketing teams, up from around 10% before 2022, as agencies lean heavily on freelance talent to stay flexible and specialized.
• 85% of freelancers worldwide report being paid late at least some of the time, and 21% say they are paid late or not at all more than half the time.
• In the creative industries, nearly half of all invoices are paid late, with many freelancers waiting up to 90 days; larger companies are more likely to pay late than small businesses.

How Dependent Are Agencies on Freelance Talent?

Over the past few years, agencies and in‑house marketing teams have rebuilt their operating models around flexible freelance labor. Data from Adweek and workforce platforms show that contractors now make up 30% to 70% of the typical marketing team, depending on the company and discipline. Before 2022, that share was closer to 10%. A 2024 analysis by Worksome found a 40% surge in freelance hiring by advertising agencies in a single year as shops sought on‑demand specialists and cost flexibility.

Separate surveys of marketing leaders show that:

• More than half say they are using more freelancers now than at any point in the past.
• Among companies that had recently conducted layoffs, 69% reported turning to freelancers to keep work moving while permanent staffing remained constrained..

This shift means that a substantial share of agency output is now delivered by people who are not on payroll. When cash gets tight, full‑time payroll tends to be protected first.

How Far Have Clients Pushed Payment Terms for Agencies?

At the top of the chain, large clients are using extended payment terms as a working‑capital strategy. The Association of National Advertisers (ANA) has documented a steady lengthening of agency payment terms:

• Between 2013 and 2019, average payment terms for agency fees rose from 45.7 days to 58.1 days, a 27% increase.
• A meaningful share of marketers now use 90‑day or even 120‑day terms for fees, production, and research.
• Some agencies have reported being asked for terms extending well beyond 120 days, with documented cases reaching 150 days or more.

In the ANA’s own reporting, finance and procurement leaders at publicly traded companies explicitly link extended supplier terms to working capital improvements that please Wall Street. Delaying payments to agencies is treated as a treasury lever, not a relationship breakdown.

The American Association of Advertising Agencies (4A’s) pushed back in its “Ripple Effect of Extending Payment Terms” guidance, stating that anything beyond 30‑day payment terms is “incompatible with the typical agency commercial model.” The 4A’s also flagged client demands that agencies pre‑fund media buys and production as particularly destructive, because they effectively turn agencies into uncompensated lenders to bigger, better‑capitalized clients.

At the same time, payment performance in digital media and advertising has deteriorated. Studies of digital media payments show that more than half of invoices to publishers and platforms are now late, and recent reporting highlights record‑high late‑payment rates across media and advertising in 2025.

What Does Late Payment Look Like for Freelancers?

Further down the chain, late payment to freelancers is becoming the norm.

The State of Freelance Work 2025 report from Remote found that:

• 85% of freelancers experience late payments at least some of the time.
• 21% are paid late, or not paid at all, more than half the time.

Invoice‑level analysis by Bonsai, drawing on data from more than 100,000 freelancers over three years, shows that:

• 29% of all freelance invoices are paid one or more days late.
• Female freelancers see late payments on 31% of invoices, compared with 24% for male freelancers.

Sector‑specific research adds more detail. A study of creative industry freelancers in the UK found that:

• Nearly half of all invoices to creative freelancers are paid late.
• Average invoice amounts can be substantial with waits of up to 90 days for payment.
• Larger companies are more likely to pay late than smaller businesses (51% vs. 41%).

Another contractor survey found that roughly 20% of contractors’ total income is delayed, with 36% reporting some income paid 30+ days late and 26% reporting income paid 60+ days late.

Where Lawmakers See the Problem: The Freelance Isn’t Free Model

Even if the causal chain from client to agency to freelancer is sometimes hard to see in the accounting, regulators have begun to target the bottom of the cascade directly.

New York City’s Freelance Isn’t Free Act, in effect since 2017, requires written contracts and payment within 30 days for covered freelance work. It also allows freelancers to recover double damages plus attorney’s fees for non‑payment and late payment.

The city’s Department of Consumer and Worker Protection five‑year report shows:

• 2,542 complaints filed between 2019 and 2023.
• 2,184 of those complaints specifically involved non‑payment or late payment.
• Freelancers who filed complaints with the city reported recouping a combined $2.9 million in owed compensation.

The model is expanding. New York State passed its own Freelance Isn’t Free law, effective August 2024, with similar 30‑day payment requirements and penalties. Los Angeles and California have also introduced protections for freelancers and small contractors, including explicit timelines for payment and statutory damages for violations.

These laws create a clear tension for agencies. At the top of their revenue stack, they face large clients pushing 60–120‑day terms and routinely paying late. At the bottom, they increasingly face 30‑day legal obligations to pay contractors and risk double‑damage penalties if they do not.

How Does Debt Actually “Trickle Down” the Marketing Supply Chain?

The cash‑flow chain in a typical campaign now looks something like this:

1. Brand or enterprise client negotiates extended terms (e.g., net 90 or net 120) and delays payment on a major campaign or media buy.
2. Agency incurs costs immediately: strategy, creative, media, and production—often using a mix of salaried staff and freelancers.
3. Payroll is rarely late. To manage the gap between outgoing costs and delayed client payment, agencies slow payment to vendors and freelancers where they can.
4. Freelancers and small studios end up waiting for weeks or months to be paid for work that may have already shipped and generated results for the client.

At each step, the entity with the least bargaining power and the least access to cheap credit bears the most risk:

• The client uses its bargaining power and credit rating to improve working capital by extending payment cycles.
• The agency carries the receivable and, in some cases, borrows to cover operations while waiting to be paid.
• The freelancer or micro‑vendor, who often lacks both legal support and cheap financing, waits the longest and feels the most day‑to‑day impact.

This is what “trickle‑down debt” means in practical terms: one decision to delay payment at the top creates a chain of delayed payments all the way down.

Late payments in marketing and advertising are not just an agency‑level cash‑flow issue. They form a trickle‑down debt chain that starts with extended client payment terms, passes through agency balance sheets, and ultimately lands on freelancers and small vendors who have the least ability to absorb it.

Agencies that take a more disciplined approach to credit and collections are better positioned to break this chain. In a sector that increasingly runs on freelance talent, paying on time is not just fair, it is a competitive advantage.

Methodology

This study synthesizes:

• Agency payment terms and practices from the Association of National Advertisers (ANA) payment terms research (2013–2019) and 4A’s guidance on extended payment terms.
• Freelance payment timing and non‑payment data from Remote’s State of Freelance Work 2025 survey, Bonsai’s invoice‑level analysis of more than 100,000 invoices, and sector‑specific studies of creative industry freelancers and contractors.
• Workforce composition and freelance reliance from Adweek’s reporting on the creative freelance boom, Worksome’s 2024 agency hiring data, and broader marketing workforce surveys.
• Legal and enforcement context from New York City’s Freelance Isn’t Free Act five‑year enforcement report, New York State Department of Labor guidance on the statewide Freelance Isn’t Free law, and related municipal and state‑level protections.
• Collections and recovery benchmarks from The Kaplan Group’s own research on B2B collections and recovery rates by outsourcing intensity.

All figures are based on the most recent publicly available data as of March 2026. Where surveys or invoice datasets are geographically limited, this is indicated in the text and the findings are used as directional evidence rather than global estimates.

The post Trickle‑Down Debt: How Late Client Payments to Agencies Cascade onto Freelancers appeared first on The Kaplan Group.

A new report by The Kaplan Group analyzes recent data from LinkedIn’s Economic Graph and the American Staffing Association showing that this pressure is not spread evenly across the economy. Some of the sectors staffing firms were built on are shrinking or automating away traditional roles, while a smaller set of industries is still adding staffing talent.

Key Takeaways

• Administrative and Support Services put the most pressure on staffing agencies, with staffing talent jobs down 29% from July 2022 to July 2025.
• Traditional industrial clients are also squeezing agencies, as staffing talent jobs fell 24% in Manufacturing and 22% in Transportation, Logistics, Supply Chain and Storage over the same period.
• Staffing demand is shifting rather than disappearing, with staffing talent jobs rising 182% in Hospitals and Health Care, 145% in Construction, and 314% in Utilities between July 2022 and July 2025.

Industries Squeezing Staffing Agencies

A handful of core client industries are doing most of the damage to traditional staffing models: light industrials, administrative/support services, and broad white‑collar sectors.

•  Light industrials are pulling back hard. From July 2022 to July 2025, staffing talent jobs fell 24% in Manufacturing and 22% in Transportation, Logistics, Supply Chain and Storage. 
• Administrative work is being automated out. Administrative and Support Services show the steepest decline in the entire chart at ‑29% in staffing talent jobs over the same period. 
• White‑collar and professional sectors are compressing demand.
  • In higher‑end markets, staffing talent jobs are down 16% in Financial Services and 6% in Professional Services between July 2022 and July 2025. 
  • At the same time, the share of contract job postings rose 24% from June 2022 to June 2023, then 10% in 2024 and 7% in 2025, while full‑time posting share moved +3% in 2023, ‑4% in 2024, and 0% in 2025, and part‑time posting share swung +74% in 2023, then ‑10% in 2024 and ‑3% in 2025. That shows that white‑collar clients are still hiring, but for fewer, more specialized, more flexible roles, which squeezes agencies built around high‑volume generalist search.

Taken together, these numbers show that some of the legacy pillars of the staffing business, industrial, administrative, and broad white‑collar, are now the sectors applying the most sustained pressure to agency revenue and cash flow.

Where Staffing Still Works

Not all industries are bad news for staffing firms. In several sectors, staffing talent jobs are growing rapidly, even as overall labor‑market churn has cooled.

The industries with the largest increases in staffing talent jobs are (July 2022–July 2025):

• Utilities: +314%
• Accommodation and Food Services: +260%
• Hospitals and Health Care: +182%
• Construction: +145%
• Government Administration: +99%
• Education: +49%
• Consumer Services: +26%
• Oil, Gas, and Mining: +11%

For agencies with strong exposure to these industries, the numbers mean that while some legacy segments are shrinking, parts of the staffing market are still expanding aggressively. Utilities (+314%), Accommodation and Food Services (+260%), Hospitals and Health Care (+182%), and Construction (+145%) are effectively propping up portions of the staffing industry by continuing to add contract roles.

These “survivor sectors” are also structurally different from the pressure sectors:

• Work is more hands‑on and harder to automate.
• Demand is driven by essential services or chronic shortages, not discretionary projects.
• Clients continue to rely on contract workers as a core part of how they operate.

For staffing firms deciding where to grow, these sectors represent some of the safest places to concentrate new business development.

How Flexible Work Reshapes Staffing Risk

Staffing risk today comes as much from how clients hire as from whether they hire at all. Contract work is now a core model:

• Contract job posting share rose 24% (2023), then 10% (2024) and 7% (2025).
• Full‑time posting share moved +3%, ‑4%, then 0% over the same years.
• Part‑time swung +74%, then ‑10%, then ‑3%.

More workers are moving from one contract role to another in the same industry, which signals that contract work is now built into long‑term workforce planning, not just used as a stopgap. For agencies, this means contract is here to stay. The risk comes from losing volume in specific sectors (admin, some industrial, broad white‑collar), not from clients abandoning flexible labor.

Remote and hybrid remain central: 

• From July 2023 to June 2025, 22% of all members adding a new role chose a fully remote position.
• Among people with prior staffing/recruiting roles, that jumps to 30%.
• Hybrid roles make up 22% of new positions for both groups.

Staffing and recruiting professionals are more likely than average to move into remote roles, leaving agencies well placed to support clients that want flexible, remote‑friendly teams.

The staffing industry is being reshaped. Agencies most at risk are the ones still concentrated in client industries where staffing talent jobs are falling, and distress is rising. Agencies that shift toward sectors where staffing talent is growing, and work is harder to automate will be better positioned to protect their cash flow and less likely to need help collecting on invoices that never should have been left so exposed in the first place.

Methodology 

ASA-LinkedIn State of Staffing Report (February 2026). The American Staffing Association partnered with LinkedIn’s Economic Graph to analyze labor market trends across the staffing industry. The report draws on data from more than 200 million U.S. LinkedIn members and approximately 500,000 professionals who have had work engagements through staffing and search companies. All figures cited in this article — including percentage changes in staffing talent jobs by sector from July 2022 to July 2025, contract posting share changes by year, remote and hybrid work figures, and observations about skill shifts and AI literacy growth — are drawn directly from this report. Figures are reported as published; no independent modeling or projection was applied.

The post Which Industries Are Putting Staffing Agencies Under the Most Pressure? appeared first on The Kaplan Group.

Key Takeaways

• Annual U.S. business bankruptcy filings reached 24,737 in 2025. This is 8.6% higher than in 2019 and 83.5% above the 2022 trough.
• From 2019 to 2025, Texas saw business bankruptcy filings rise from 2,429 to 4,087. This is the largest absolute and percentage increase of any state, followed by Florida, California, Georgia, and New Jersey.
• National Chapter 11 filings grew from 6,052 in 2019 to 11,730 in 2025, meaning more companies are trying to reorganize debt rather than shut down.
  

National business bankruptcy trends

U.S. business bankruptcy filings fell sharply in the years immediately after the pandemic shock, before rebounding strongly through 2025. Annual business filings dropped from 22,780 in 2019 to a low of 13,481 in 2022, then climbed to 24,737 in 2025. That left business filings 8.6% higher than in 2019 and roughly 83.5% above the 2022 trough by the end of the period.

In contrast, the recovery in consumer filings was much weaker. Nonbusiness bankruptcies declined from 752,160 in 2019 to 549,577 in 2025, leaving them about 27% below pre‑pandemic levels. 

State hotspots where business filings are rising fastest

The national rebound is not evenly distributed. Some states are now well above their 2019 business bankruptcy levels, while others still sit below that baseline.  But every state saw business bankruptcy filings rise between 2022 and 2025.

Measured by percentage growth in business bankruptcy filings from 2019 to 2025, the five strongest increases came in Texas, Florida, Colorado, Arkansas, and Georgia. 

Measured by absolute growth in filings over the same period, the largest increases came in Texas, Florida, California, Georgia, and New Jersey.

Together, those states account for much of the national rise in filings, though the mix of scale and growth differs across them.

• Texas posted the largest increase, rising from 2,429 business filings in 2019 to 4,087 in 2025, a gain of 1,658 filings or 68.3%. From 2022 to 2025, filings rose by 2,209, a jump of 117.6%.
• Florida increased from 1,817 in 2019 to 2,372 in 2025, a gain of 555 filings or 30.5%. From 2022 to 2025, filings rose by 1,101, or 86.6%.
• California rose from 2,773 in 2019 to 3,128 in 2025, an increase of 355 filings or 12.8%. From the 2022 trough of 1,775, filings climbed by 1,353, a rebound of 76.2%.
• Georgia increased from 863 in 2019 to 1,076 in 2025, a gain of 213 filings or 24.7%. From 2022 to 2025, filings rose by 570, or 112.6%.
• New Jersey went from 662 in 2019 to 801 in 2025, an increase of 139 filings or 21.0%. From 2022 to 2025, filings rose by 225, or 39.1%.

States still below pre‑pandemic levels

While every state recorded an increase in business bankruptcy filings between 2022 and 2025, a number of states still remained below their 2019 levels by 2025.  South Dakota, Kentucky, and Connecticut remained well below their pre-pandemic business bankruptcy levels in 2025. 

Filings fell from 63 to 28 in South Dakota, from 271 to 120 in Kentucky, and from 189 to 109 in Connecticut. Other states still below their 2019 business bankruptcy totals included Kansas, Wisconsin, Arkansas, Michigan, Nebraska, and Indiana.

Bankruptcy pressure clearly re-emerged after the 2022 trough, but it did so with very different intensity across states.

Data by State

The Chapter 11 restructuring signal

The mix of business bankruptcies matters as much as the total, because a rise in Chapter 11 points to more companies trying to reorganize rather than shut down outright. Nationally, business Chapter 11 filings rose from 6,052 in 2019 to 11,730 in 2025, suggesting that the current business distress cycle is not just larger, but also more restructuring-oriented. 

In several states, stronger Chapter 11 activity appears to be contributing to the rebound, reinforcing the need for creditors to prepare for more negotiated outcomes, court-supervised delays, and partial recoveries rather than quick liquidation-driven resolutions.

What this means for collections and credit teams

Taken together, the data suggests that U.S. business bankruptcy risk has not simply returned, but has returned in a more selective and operationally important way. The strongest signals are:

• Business filings have fully recovered and now sit above 2019 levels, while consumer filings remain well below their pre-pandemic numbers.
• Large commercial states such as Texas, Florida, California, New York, and Georgia show meaningful increases in business bankruptcies, though the size of those increases varies significantly across markets.
• In several jurisdictions, the recovery appears to be driven in part by stronger Chapter 11 activity, not just small liquidation cases.

For a B2B audience, that implies the need to:

• Monitor business bankruptcy trends separately from consumer trends. The aggregate bankruptcy number can hide commercial risk that is growing faster under the surface.
• Pay closer attention to geographic exposure. Accounts in states with the largest absolute increases in business filings should face tighter credit policies and faster escalation when invoices become seriously past due.
• Prepare for more restructuring‑driven delays. In Chapter 11‑heavy states, expect more automatic stays, plan negotiations, and partial recoveries instead of quick resolutions.

One practical implication: waiting longer to place delinquent business accounts in high‑risk states could mean the difference between negotiating a payment plan and being frozen out by a bankruptcy filing.

Methodology

This analysis uses annual bankruptcy filing totals from federal judiciary statistics for 2019 through 2025. National totals come from the annual summary table of business and nonbusiness cases. State-level results are constructed from corrected state-year business filing totals derived from the annual F-5A tables.

The analysis focuses on 2019, 2022, and 2025 to capture three key points in the cycle:

• 2019 as the pre‑pandemic baseline.
• 2022 as the post‑pandemic trough in business filings.
• 2025 as the most recent year available.

State hotspot rankings in this version are based on raw filing counts rather than population- or establishment-adjusted rates. As a result, the findings are best interpreted as indicators of where filing activity is rising most in volume terms, not necessarily where distress is highest on a per-business basis.

The post Which States Are Driving the New Wave of Business Bankruptcies? appeared first on The Kaplan Group.

Key Takeaways

• U.S. goods exports grew by $118 billion between 2024 and 2025, and imports grew even more, by $143 billion. 
• The annual goods deficit grew from -$1,215 billion to -$1,240 billion.
• March alone saw the monthly goods deficit worsen by $71 billion year over year, while October improved by $41 billion.
• The largest balance hits were in manufactured and machinery‑related categories such as office machines (-$136 billion) and manufactured goods (-$109 billion), where imports surged much faster than exports.

What changed in the overall U.S. goods trade in 2025?

Both U.S. exports and imports increased in 2025, and the goods deficit ended slightly wider than in 2024. But the monthly data show that this deterioration didn’t happen evenly over time. Instead, a few months saw sharp import surges that outweighed steady export growth.

March was the most striking example. Compared with March 2024, exports rose by $12.4 billion, while imports jumped by $83.5 billion, widening the monthly deficit by $71.1 billion year over year. October told the opposite story: exports climbed by $25.8 billion and imports actually fell by $15 billion, improving the monthly balance by $40.8 billion.

This uneven pattern shows that the 2025 widening was import‑led and irregular, not a steady, month‑by‑month decline.

Where did the trade balance improve?

We calculated how each U.S. trading partner’s balance changed from 2024 to 2025. For every country, we looked at how exports and imports shifted to find the balance change. 

A positive balance change means the U.S. trade position improved — it either sold more, bought less, or both. A negative balance change means the balance worsened because imports grew faster than exports.

The U.S. goods balance improved most sharply with a handful of key partners, led overwhelmingly by China at +$93.4 billion — more than four times larger than the next-biggest improvement. In each case, the improvement reflects some combination of export growth and import restraint on the bilateral level. The U.S. either sold more into those markets, bought less from them, or both.

Top 10 bilateral balance improvements (2025 vs. 2024):

• China (+$93.4B)
• United Kingdom (+$20.9B)
• European Union (+$17.1B)
• Canada (+$15.5B)
• Italy (+$13.2B)
• Germany (+$11.6B)
• South Korea (+$9.6B)
• Brazil (+$7.7B)
• Hong Kong (+$6.6B)
• Netherlands (+$6.5B)
  

Bottom 10 bilateral balance deteriorations (2025 vs. 2024):

• Taiwan (−$73B)
• Vietnam (−$54.7B)
• Ireland (−$27.7B)
• Thailand (−$26.4B)
• Mexico (−$25.4B)
• Australia (−$13.3B)
• India (−$12.4B)
• Malaysia (−$5.9B)
• Indonesia (−$5.8B)
• Philippines (−$3.7B)

Which commodity groups widened the deficit the most?

To understand what sits behind the macro movement, we compare 2024 to 2025 for each principal commodity grouping using three simple metrics:

For each product group, we look at how exports and imports changed from 2024 to 2025.

• Export change = exports in 2025 minus exports in 2024
• Import change = imports in 2025 minus imports in 2024
• Balance change = export change minus import change

If the balance change is negative, it means the trade balance got worse — imports increased more than exports.

The largest balance deteriorations in the principal commodities table are concentrated in manufactured and machinery‑related groupings:

• Office machines saw the worst balance change, with the deficit widening by  $135.9 billion as imports jumped far faster than exports.
• Manufactured goods also deteriorated sharply, with the trade balance worsening by $108.7 billion on relatively modest export growth.
• Machinery and transport equipment recorded a large deficit increase of $84.0 billion, again driven by much faster import growth than export growth.
• Miscellaneous manufactured articles (smaller category) saw the balance fall by $34.5 billion, with imports rising more than four times the export gain.
• Medicinal and pharmaceutical products showed a similar pattern, with the balance worsening by $33.8 billion as imports outpaced exports.
• Chemicals and related products had a balance decline of $23.6 billion, reflecting a sizable rise in imports relative to exports.
• Miscellaneous manufactured articles (broader category) saw the balance deteriorate by $23.9 billion despite higher exports.
• Telecommunications equipment registered a balance decline of $20.5 billion, as imports increased by almost seven times the export gain.
• Special transactions worsened the balance by $14.6 billion, driven entirely by higher imports while exports were flat.
• Nonferrous metals saw the balance deteriorate by $13.1 billion, with imports again rising much faster than exports.

In each of these categories, exports did grow, but imports grew far more, which is why the balance moves sharply negative even in areas where outbound shipments improved. In plain terms, the deterioration is not about the U.S. suddenly selling less machinery or manufactured goods abroad; it is about buying significantly more of those products from overseas than before.

Product‑level exports, imports, and balance changes, 2024–2025

Taken together, the exhibit‑based evidence points to three simple trade‑only conclusions for 2025. First, overall goods trade was stronger in volume terms, with both exports and imports higher than in 2024. Second, the goods deficit widened modestly because import growth outpaced export growth, and that widening was concentrated in specific months rather than spread evenly across the calendar. Third, the commodity breakdown shows that the slippage in the balance is heavily concentrated in manufactured, machinery, and related categories, where import growth was particularly strong relative to export growth.

Methodology

This analysis uses publicly available U.S. Census Bureau data on goods exports and imports from the “U.S. International Trade in Goods and Services” releases for 2024 and 2025. All figures refer to goods trade only.

For each period (annual, monthly, or by product group), the goods balance is calculated as:

• Balance = Exports − Imports
  • Negative balance = deficit
  • Positive balance = surplus

To compare 2025 with 2024, we use simple year‑over‑year changes:

• Export change = Exports 2025 − Exports 2024
• Import change = Imports 2025 − Imports 2024
• Balance change = Balance 2025 − Balance 2024

Because Balance = Exports − Imports, a negative balance change means the trade balance worsened, usually because imports grew faster than exports.

We apply the same calculations at three levels:

• Annual totals to describe the headline change in the overall deficit
• Monthly data to identify which months drove most of the movement
• Principal commodity groups to see which product categories contributed most to the change in the balance

The results are descriptive and are not adjusted for inflation, exchange rates, or services trade.

The post How Did U.S. Goods Trade Really Change in 2025? appeared first on The Kaplan Group.

How common are cash flow problems for small businesses?

Cash flow volatility is now a routine part of running a small business, even for firms that are otherwise healthy and optimistic. These stats show how thin most cash buffers are and how quickly a disruption can become a crisis.

1. 88% of small businesses report experiencing cash flow disruptions in the past year, yet fewer than one-third take proactive steps to prevent them.​
2. 39% of small businesses say they do not have enough cash on hand to cover one month of operating expenses in an emergency.​
3. Only 31% of small businesses actively optimize their cash flow rather than reacting week to week.​
4. 23% of business owners expect their cash reserves to shrink over the next year, while more than half expect supplier prices to rise.​
5. In Q1 2025, 58% of small businesses cite inflation as their top concern heading into 2026.​
6. 29% of startups fail because they run out of cash.
7. Only 30% of small business owners finished 2025 with profitability above expectations, down from 57% in 2024.​
8. U.S. small business revenue declined by about 11,850 dollars per business on average in 2024, while employment fell by 49,100 jobs in 2025 compared to 2024.​
9. 58% of small businesses used a corporate credit card in the prior 12 months, 34% use a loan, and 35% use a line of credit as regularly used financing products.​
   

How are payroll and operating costs squeezing small business cash flow?

Rising payroll, benefits, and insurance costs are eating a growing share of small business cash, making it harder to absorb late payments or dips in revenue. These pressures directly increase the odds that owners fall behind on their own obligations.

10. The share of small businesses missing payroll—failing to pay employees on time—is rising again, and within two quarters of a missed payroll a firm’s workforce shrinks by 8–10% on average.
11. After a missed payroll event, small business employment does not return to its prior level for at least two years.​
12. Payroll consumes roughly 18% of total small business cash outflows for the typical small business employer.​
13. In JPMorgan Chase Institute data, the typical employer small business had about 18,700 dollars in annual payroll outflows, representing roughly 18% of total cash outflows.
14. The average family health insurance premium for small businesses (10–199 employees) reached 26,054 dollars in 2025, up from 16,977 dollars in 2020.​
15. Only 59% of firms with 10–199 employees now offer health benefits.​
16. Median proposed small‑group premium increases for 2026 are around 11%.
17. KFF reports that average deductibles have risen about 43% over the past decade.

What financial challenges are small business owners facing day to day?

Beyond raw cash balances, small employer firms are wrestling with weak demand, falling profitability, and rising borrowing costs. These stats show how often owners are using personal safety nets to keep the business afloat.​

18. 48% of small employer firms cite weak sales as a financial challenge, up from 44% the prior year.​
19. More firms reported revenue decreases than increases in the prior 12 months: 38% saw revenue decline versus 41% that saw revenue rise.​
20. Only 46% of small employer firms were profitable in 2024; 35% broke even and 19% operated at a loss.​
21. 35% of firms report that making payments on debt or dealing with higher interest rates is a major financial challenge, and 28% cite limited credit availability.​
22. Just 6% of small employer firms say they face no financial challenges at all.​
23. 55% of business owners used personal funds to respond to financial challenges, 51% tapped cash reserves, 48% raised prices, and 36% obtained funds that must be repaid.​
24. Only 19% of small employer firms are classified as growing, based on revenue and employment patterns in the Fed Small Business Credit Survey.​

How much debt are small businesses carrying, and how risky is it?

Debt is widespread and increasingly a barrier to getting new financing, especially for firms that took on pandemic‑era loans. This section highlights where balances and default risks are building.

25. 29% of small employer firms carry no business debt, a share that has barely changed in recent years.​
26. 39% of firms hold more than 100,000 dollars in business debt, up from 31% in 2019, and many say this is now a barrier to borrowing more.​
27. Among firms that were denied financing, 41% cited having too much existing debt, up from 22% in 2021.​
28. The SBA disbursed about 4.1 million COVID EIDL loans totaling roughly 400 billion dollars; 1.3 million of these are now in default, liquidation, or charged off.
29. By late 2024, SBA had charged off more than 47 billion dollars in COVID EIDL loans.​
30. The SBA Hardship Accommodation Plan for EIDL borrowers ended on March 19, 2025, removing a key safety valve for reduced payments; projections put the overall EIDL default rate near 37%.
31. The delinquency rate on business loans at all commercial banks reached 1.33% in Q3 2025, up from 1.18% a year earlier.​

How hard is it for small businesses to get financing?

Owners are applying for modest amounts of capital, but approval rates are uneven and denials increasingly relate to existing debt loads. These stats show the growing access‑to‑capital gap that pushes more businesses toward alternative lenders and credit cards.

32. 37% of small employer firms applied for a loan, line of credit, or merchant cash advance in the prior 12 months, similar to prepandemic levels.​
33. 40% of applicants sought less than 50,000 dollars in total financing.​
34. Only 41% of applicants received all the financing they were seeking; 36% received some, and 24% received none.​
35. Small banks fully approved 54% of applications on average, , a higher full‑approval rate than large banks or online lenders.​
36. Application rates at large banks fell from 44% to 39% between 2023 and 2024, and one OnDeck/Ocrolus survey found about 72% of owners bypass traditional bank loans in favor of alternative lenders.
37. Net satisfaction with online lenders plunged from 15% to 2% between 2023 and 2024, largely because of higher interest rates and unfavorable repayment terms.​
38. 63% of small business owners plan to seek additional capital by early 2026, up from 38% the prior year.​

How expensive is small business borrowing today?

Borrowing costs have risen across the board, especially outside traditional banks. For many owners, the cost of capital is becoming a cash flow problem of its own.

39. Average small business bank loan rates ranged from about 6.3% to 11.5% in Q3 2025, depending on loan type and borrower risk.​
40. Online and alternative lenders can charge between 14% and 99% APR, especially for short‑term working capital and merchant cash advances.​
41. The average rate paid on short‑maturity small business loans was 9.1% in January 2026.​
42. About 25% of small business owners borrow regularly—at least once every three months.​
43. The average SBA 7(a) loan size in fiscal 2025 was 456,595 dollars, reflecting continued reliance on this program for larger growth and refinancing needs.​

Are bankruptcies and financial distress increasing for small businesses?

Bankruptcy trends provide a lagging but powerful signal that more businesses are getting into trouble. Rising filings suggest growing demand for restructuring, liquidation, and debt collection services.

44. Total U.S. bankruptcy filings reached 565,759 in 2025, up 11% from 508,953 in 2024, though still below the 757,816 filings in 2019.​
45. Commercial bankruptcy filings increased 5% to 31,810 in 2025.​
46. Business bankruptcy filings hit 24,039 in Q3 2025, the highest quarterly total since 2016.
47. Small business Subchapter V elections under Chapter 11 rose 11% in 2025 to 2,446 cases.​

How does household debt and consumer stress spill over into small business cash flow?

Consumer finances and business finances are intertwined—especially for microbusinesses and owner‑operators who rely on personal credit. Higher household debt and delinquencies can make it harder for customers to pay and for owners to self‑fund their companies.

48. Total U.S. household debt reached about 18.8 trillion dollars in Q4 2025, up 191 billion dollars from the prior quarter.
49. Credit card balances climbed to roughly 1.28 trillion dollars in Q4 2025, a 5.5% increase year‑over‑year.​
50. About 4.8% of all outstanding household debt is in some stage of delinquency.​
51. The average credit card balance per consumer reached 6,735 dollars in mid‑2025, with average APRs around 22%.​

Sources

• Federal Reserve Small Business Credit Survey — 2025 Report on Employer Firms (2024 data)
• Relay / OnDeck cash flow trend research on small businesses
  
• NFIB Small Business Economic Trends reports (late 2025–early 2026)
• Intuit QuickBooks Small Business Index and financing reports
• U.S. Chamber of Commerce Small Business Index and cash flow disruption guidance
• Cardiff 2025 U.S. Small Business Funding Report​
• Equifax Small Business Delinquency Index updates​
• Federal Reserve FRED business loan delinquency series and supervision reports
• NBER research on credit cards and small business financing
• JPMorgan Chase Institute small business cash buffer analysis​
• Gusto and related payroll/cash‑flow commentary
• Bluevine small business cash flow and reserve surveys
• PNC small business owner sentiment and cash reserve expectations​
• Health System Tracker / KFF small business health premium and deductible data
• Epiq AACER and U.S. Courts bankruptcy statistics
• Experian and other credit card debt statistics
• Federal Reserve Bank of New York household debt and credit updates
• Boston Fed and other tariff impact research on small businesses
• Keka / Patriot and other payroll cost benchmarks

The post 51 Small Business Cash Flow Statistics and Financing Pain Points appeared first on The Kaplan Group.

Key Findings

• Average U.S. search interest in “marketing agency” jumped from 12.9 in the 2010s to 47.3 in 2022–2025, a roughly 266% increase, while “advertising agency” interest fell about 15% over the same window.
• A handful of states—led by Oregon, Virginia, New York, New Jersey, and Maryland—combine strong demand signals with attractive labor-market fundamentals for marketing and advertising.
• In 2025, 97% of agencies reported dealing with late client payments and 71% said at least one in four invoices is paid late.

The AI-Era Surge in Marketing Agency Demand

Over the past two decades, search interest in “advertising agency” has faded while searches for “marketing agency” have taken off.

Using monthly Google Trends data for the U.S. from 2004 through early 2026, broken into five macro periods, the shift is unmistakable. Comparing the 2010s baseline directly to the 2022–2025 window:

• “Marketing agency” searches rose from an average of 12.9 to 47.3 — a gain of more than 34 index points, or roughly 266%.
  
• “Marketing” rose modestly, from 50.4 to 58.6, about a 16% increase.
  
• “Advertising” fell approximately 15%, from 43.4 to 37.1.
  
• “Advertising agency” fell approximately 15%, from 19.2 to 16.4.

The inflection in “marketing agency” interest is concentrated in two specific windows: a step-change in 2020–2021 (to an average of 27.3), followed by a sharper acceleration in 2022–2026 (to an average of 48.8). That second jump lines up directly with the mainstream adoption of generative AI tools.

Where Agency Demand Is Heating Up?

We created a state-level Trend Score to summarize where marketing and advertising activity looks like it’s “heating up” right now. The score is designed to be readable and comparable across states. Each state gets a Trend Score from 0 to 100, where a higher score means a stronger combination of demand signal (search interest) and labor-market signal (jobs and wages).

Top 5 states by trend score

•     Oregon — 77.1
•     Virginia — 69.2
•     New York — 68.1
•     New Jersey — 67.5
•     Maryland — 64.9

Bottom 5 states by trend score

•     West Virginia — 1.4
•     Montana — 5.8
•     Hawaii — 7.6
•     South Dakota — 13.8
•     Nebraska — 17.3
•     Kentucky — 18.0

The Late-Payment Crisis Hitting Marketing and Advertising Agencies

Despite the demand surge for marketing, late payments have become widespread in the marketing and advertising sector. They now represent a structural financial threat.

Research from Ignition’s 2025 Agency Pricing and Cash Flow Report paints a difficult picture:

• 97% of agencies regularly deal with late client payments.
• 71% say at least one in every four invoices is paid late.
• 56% say late invoices typically take two weeks to two months past the due date to be collected.
• 84% of agencies spend between 3 and 10+ hours per month chasing overdue invoices.
• 63% describe their agency’s cash flow as unpredictable.

In the digital media and advertising supply chain specifically, late payments reached record levels in 2025. According to OAREX’s H1 2025 Digital Media and Advertising Payments Study:

• 58% of digital media payments were late in the first half of 2025, up from 49% in the prior period.
• 32% of payments were more than five days late — a record high.
• 18% were more than 15 days late — also a record high.
• The share of consistently on-time payers dropped from 53% to 43% in a single reporting period.

The forces driving unprecedented demand for marketing and advertising agencies are colliding with a late-payment environment that leaves even growing firms exposed to chronic cash flow risk. Agencies that proactively tighten payment terms, invest in collections, and align pricing with risk are far more likely to convert this AI-era boom into stable margins and long-term resilience.

Methodology

Google Trends data were pulled as monthly index values for four search terms — “Advertising,” “Advertising agency,” “Marketing,” and “Marketing agency” — for the United States from January 2004 through February 2026. Index values are normalized on a 0–100 scale relative to peak search interest in the full series. Period averages were computed for five macro regimes: 2004–2009, 2010–2014, 2015–2019, 2020–2021, and 2022–2026. A separate 2010–2019 vs. 2022–2025 comparison was computed to isolate the pre-AI-era baseline from the post-ChatGPT window. Google Trends is correlational and normalized; all trend observations in this study are described as associations, not causal claims.

BLS employment and wage data were drawn from the Bureau of Labor Statistics Occupational Employment and Wage Statistics (OEWS) May 2023 and May 2024 tables for four occupations: Marketing Managers (SOC 11-2021), Advertising and Promotions Managers (SOC 11-2011), Market Research Analysts and Marketing Specialists (SOC 13-1161), and Advertising Sales Agents (SOC 41-3011). Data were available at the area level; national aggregates were produced by summing employment across all areas and computing employment-weighted average wages.

B2B payment and late-payment statistics are drawn from Ignition’s 2025 Agency Pricing and Cash Flow Report, the OAREX H1 2025 Digital Media and Advertising Payments Study, and supporting research from Atradius, QuickBooks, and the Association for Financial Professionals.

What goes into the trend score by state

The score blends three components: 

• Google Trends demand proxy (state-level search interest for “marketing agency”, 2/16/21–2/16/26) Weight: 45%
• BLS growth proxy (percent change in employment from 2023 to 2024) across these occupations: Marketing Managers; Advertising and Promotions Managers; Market Research Analysts and Marketing Specialists; Advertising Sales Agents. Weight: 35%
• BLS value proxy (2024 employment-weighted mean annual wage across the same occupations) Weight: 20%
• To keep any single outlier state from dominating, each component is normalized using a 5th–95th percentile min-max scaling, clipped to 0–1, then combined into the final 0–100 score.

Sources

• Bureau of Labor Statistics, Occupational Employment and Wage Statistics, May 2023 and May 2024 — Marketing Managers, Advertising and Promotions Managers, Market Research Analysts and Marketing Specialists, Advertising Sales Agents
• Google Trends, United States, January 2004 – February 2026
• Ignition, 2025 Agency Pricing and Cash Flow Report
• OAREX, H1 2025 Digital Media and Advertising Payments Study
• Performance Marketing World, Late Payments in Media and Advertising Hit Record Highs (2025)
  

The post Are Marketing Agencies Growing on Paper but Starving for Cash? appeared first on The Kaplan Group.

The Small Business Administration has issued new rules that shut lawful permanent residents out of its main small‑business loan programs, even if they own just 1% of a company. That shift could pull billions of dollars in affordable credit away from immigrant‑owned and mixed‑ownership firms. For a startup restaurant where a green card holder owns a small stake, that can mean losing a seven‑figure SBA package and facing a shorter‑term bank loan with thousands more in monthly payments. 

This analysis by The Kaplan Group examines how that change could reshape small business financing, hiring, and long‑term economic growth, particularly for companies with immigrant owners.

Key Takeaways

• SBA loans backed $44.8 billion in FY2025, so excluding the roughly 12.8 million green card holders puts $2.2–$6.7 billion in annual credit for immigrant‑owned firms at risk.
• Immigrants start businesses at about 80% higher rates than native‑born Americans and helped found 46.2% of Fortune 500 companies, so limiting their access to SBA loans is likely to cut into hiring and innovation.
• SBA loans supported 84,400 businesses in FY2025, and thousands of mixed‑ownership firms now face a choice between restructuring ownership or losing access to these programs, creating new legal, operational, and compliance costs.

How Did SBA Lending Rules Tighten So Quickly for Green Card Holders?

On February 2, 2026, the Small Business Administration announced a major policy shift: lawful permanent residents—the roughly 12.8 million green card holders who live and work in the United States—will no longer qualify for SBA‑backed loans. Under the new rule, even a 1% ownership stake by a green card holder makes a business ineligible for the SBA’s flagship 7(a) and 504 programs. It is the most sweeping tightening of SBA lending eligibility in the agency’s 72‑year history and is likely to send economic ripple effects well beyond the immigrant‑owned firms it directly targets.

The policy did not arrive in a vacuum. It is the third escalation in just over a year. Previously, the SBA required that businesses applying for loans be at least 51% owned by U.S. citizens, nationals, or lawful permanent residents. In 2025, the agency raised that threshold to 100%. Then, in December 2025, a policy note allowed up to 5% ownership by non‑citizens. The latest guidance rescinds that exception entirely and goes further by removing green card holders from the eligibility pool altogether.

“The Trump SBA is committed to driving economic growth and job creation for American citizens—which is why, effective March 1, the agency will no longer guarantee loans for small businesses owned by foreign nationals,” SBA spokesperson Maggie Clemmons said in a statement. The agency framed the move as aligned with President Trump’s January 2025 executive order, “Protecting the American People Against Invasion.”

How Big Is the SBA Loan Portfolio

The SBA’s loan programs are foundational infrastructure for America’s small business economy. In fiscal year 2025, the agency guaranteed 84,400 loans totaling $44.8 billion, a record. That included 77,600 loans through the 7(a) program ($37 billion) and 6,750 loans through the 504 program ($7.8 billion). On an average week, the SBA backs about 1,600 loans worth over $860 million—roughly 320 loans per working day.

These aren’t just numbers on a ledger. SBA loans usually come with lower interest rates and longer repayment terms than most bank loans, which keeps monthly payments down and leaves more cash in the business.

A typical SBA 7(a) loan for a larger borrower carries a maximum rate of prime plus 3% or less, with terms up to 25 years for real estate and up to 10 years for working capital. By contrast, many conventional bank loans run in the 6% to 12% range and must be repaid in three to five years, which means higher monthly payments for the same amount of debt.

For a $400,000 loan, that difference can add up to thousands of dollars more per month and well over $100,000 in extra interest over the life of the loan. SBA loans also usually require less collateral and fewer restrictive covenants, so they are often the only realistic option for newer firms without deep assets or a long credit history.

That is why this policy shift matters so much. Immigrant entrepreneurs who are pushed out of SBA programs are not just losing a government perk; they are being moved into costlier, shorter‑term, and more demanding financing that many early‑stage businesses simply cannot afford or qualify for.

How Much Do Immigrant Entrepreneurs Contribute to U.S. Business Formation?

The economic data on immigrant entrepreneurship is unambiguous. A landmark study co‑authored by MIT economist Pierre Azoulay, which analyzed over one million firms founded between 2005 and 2010, found that immigrants are approximately 80% more likely to start a business than native‑born Americans. The entrepreneurship rate for immigrants was 0.83%, compared to 0.46% for the native‑born—a disparity that held across firms of every size.

These numbers are not relics. As of 2023, immigrants accounted for 23.6% of all entrepreneurs and 25% of all new businesses, despite representing just 14.3% of the U.S. population. Immigrant‑owned businesses generated $116.2 billion in business income that year. The contributions extend to the top of the corporate ladder: 46.2% of Fortune 500 companies—231 firms—were founded by immigrants or their children, generating a combined $8.6 trillion in revenue in 2024 and employing over 15 million people globally.

Among the most recognizable names built by immigrants or their children: Google, Amazon, Apple, Tesla, Zoom, Chobani, Nordstrom, and WhatsApp. Immigrants were also involved in the development of 30% of patents in strategic industries in recent years, and more than half of U.S. billion‑dollar startups were founded by immigrants.

Key figures at a glance

How Much Small‑Business Financing Could the New SBA Rule Put at Risk?

Precise figures on how many SBA loans go to immigrant‑owned businesses are elusive. The agency does not publicly break down approvals by the immigration status of owners. However, industry estimates place the share at 5% to 15% of all SBA lending historically. One Central Valley lender estimated that roughly 10% of their SBA loan portfolio includes legal permanent resident ownership.

Applying even the conservative end of that range to FY2025’s $44.8 billion in guaranteed loans implies that $2.2 billion to $6.7 billion in annual small business financing is directly jeopardized. For individual borrowers in FY2024, the average 7(a) loan of $443,097 and average 504 loan of $1.1 million represent the difference between launching a business or not.

How Could Tighter SBA Rules for Immigrants Affect U.S. Job Creation and GDP?

The stakes extend well beyond the immigrant entrepreneurs themselves. Small businesses with fewer than 500 employees account for 99.9% of all U.S. firms, employ 61.6 million Americans—45.9% of the private‑sector workforce—and contributed 88.9% of total net job creation between March 2023 and March 2024. Small businesses represent 43.5% of the nation’s GDP.

Immigrant‑owned businesses are a disproportionate driver of that job engine. The NBER study found that immigrant‑founded firms had about 1% more employees on average than those founded by native‑born citizens, and immigrant entrepreneurs “appear to play a relatively strong role in expanding labor demand relative to labor supply.” In aggregate, immigrant‑owned businesses employed nearly eight million American workers. The Congressional Budget Office estimates that higher‑than‑expected immigration between 2024 and 2034 will boost GDP by $8.9 trillion.

Restricting SBA financing does not just affect whether immigrant‑owned businesses survive; it also affects whether they hire. And when small-business hiring slows, the pressure is felt disproportionately in sectors like construction, hospitality, healthcare, and professional services, where small firms dominate.

How Will Losing SBA Loans Change Costs and Options for Immigrant‑Owned Businesses?

For immigrant entrepreneurs who can still access capital, the math changes sharply. Without SBA guarantees, borrowers face conventional loan terms that are shorter, more expensive, and harder to qualify for. The higher debt‑service costs reduce the return on investment for equipment purchases, real estate, and working capital—the very categories where SBA financing is most commonly used.

Businesses currently relying on SBA financing that have any green card holder in their ownership structure face a March 1 deadline to restructure or lose access to their credit lines. For partnerships, LLCs, and closely held corporations, this is not a paperwork exercise. It can require buyouts, legal restructuring, and in some cases, the dissolution of business relationships that were central to the enterprise’s founding.

Applications approved before the deadline can close under the old rules, but new applications will not qualify. Lenders must verify ownership before issuing an SBA loan number, creating a compliance burden that will slow processing even for fully eligible applicants.

What Small Businesses Can Do

For small businesses, the new rule is a financing problem that requires a clear plan, not just a legal opinion. Firms with any green card ownership should review how much they rely on SBA credit, check whether key projects or renewals assume SBA terms, and stress‑test cash flow under higher‑rate, shorter‑term conventional loans.

Owners can then map out practical next steps. That may include talking with their lenders about non‑SBA products, exploring options from CDFIs and community banks, or looking at state and local small‑business programs that still serve immigrant entrepreneurs.

Business groups also have an important role. Chambers of commerce, industry associations, and local business alliances can gather simple metrics—deals delayed, expansions canceled, jobs not filled—and share them with lawmakers in plain economic terms.

Advisors and lenders who work with immigrant‑owned or mixed‑status firms will be central in this transition. Their job is to help owners decide when restructuring ownership truly makes sense, when it does not, and how to keep viable companies from being sidelined by a rule change rather than by their fundamentals.

Sources

1. U.S. Small Business Administration, “Trump SBA Delivers Record Capital to Small Businesses in FY25,” September 30, 2025. https://www.sba.gov/article/2025/09/30/trump-sba-delivers-record-capital-small-businesses-fy25​
   
2. U.S. Small Business Administration, “Policy Notice 5000-876441: Update to SOP 50 10 8 – Citizenship and Residency Requirements,” February 2, 2026. https://www.sba.gov/document/policy-notice-5000-876441​
   
3. U.S. Small Business Administration, “Terms, Conditions, and Eligibility: 7(a) Loan Program.” https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility​
   
4. U.S. Small Business Administration, Office of Advocacy, “Frequently Asked Questions About Small Business, 2024,” July 2024. https://advocacy.sba.gov/2024/07/23/frequently-asked-questions-about-small-business-2024/​
   
5. Associated Press, “SBA to bar green card holders from its loan program starting March 1,” February 3, 2026. https://apnews.com/article/green-card-small-business-2e82cf5fad56ceff18f01e74ca2d000c​
   
6. ABC News, “SBA says legal permanent residents will be ineligible for its loan program effective March 1,” February 2, 2026. https://abcnews.go.com/Business/wireStory/sba-legal-permanent-residents-ineligible-loan-program-effective-129822271​
   
7. Pierre Azoulay, Benjamin Jones, J. Daniel Kim, and Javier Miranda, “Immigration and Entrepreneurship in the United States,” National Bureau of Economic Research, Working Paper No. 27778, September 2020. https://www.nber.org/papers/w27778​
   
8. MIT News, “Study: Immigrants in the US are more likely to start firms, create jobs,” May 9, 2022. https://news.mit.edu/2022/study-immigrants-more-likely-start-firms-create-jobs-0509​
   
9. American Immigration Council, “Nearly Half of Fortune 500 Companies in 2025 Were Founded by Immigrants or Their Children,” August 2025. https://www.americanimmigrationcouncil.org/report/fortune-500-companies-founded-by-immigrants-2025/​
   
10. American Immigration Council, “Map the Impact: U.S. Immigration Statistics.” https://map.americanimmigrationcouncil.org/locations/national/​
    
11. National Foundation for American Policy, “Immigrant Entrepreneurs and U.S. Billion-Dollar Companies,” July 2022. https://nfap.com/wp-content/uploads/2022/07/Immigrant-Entrepreneurs-and-Billion-Dollar-Companies.DAY-OF-RELEASE.2022.pdf​
    
12. Congressional Budget Office, “Effects on CBO’s Baseline of the Increase in Immigration Among People Without Permanent Legal Status,” November 2024. https://www.cbo.gov/system/files/2024-11/60988-Immigration.pdf​
    
13. Economic Innovation Group, “Immigrant inventors are crucial for American national and economic security,” September 2025. https://eig.org/immigrants-patents/​
    
14. U.S. Bureau of Labor Statistics, “Small businesses continue to outpace large businesses in job creation,” May 2025. https://www.bls.gov/opub/ted/2025/small-businesses-continue-to-outpace-large-businesses-in-job-creation.htm​
    
15. LendingTree, “The SBA Provides Billions Each Fiscal Year,” January 2025. https://www.lendingtree.com/business/sba-loans-study/​
    
16. The Business Journal, “SBA bars green card holders from business loan ownership starting March 1,” February 1, 2026. https://thebusinessjournal.com/sba-bars-green-card-holders-from-business-loan-ownership-starting-march-1/​
    
17. U.S. Department of Homeland Security, “Lawful Permanent Resident Population Estimates, January 2024.”​
    
18. Forbes, “How The SBA’s New Citizenship Rule Reshapes Lending,” February 11, 2026. https://www.forbes.com/sites/nataliemadeiracofield/2026/02/11/sbas-new-citizenship-rule-reshapes-small-business-lending/​
    
19. NerdWallet, “Green Card Holders No Longer Eligible for SBA Loans,” February 3, 2026. https://www.nerdwallet.com/business/loans/news/sba-loan-green-card-holders​
    
20. Reuters, “New rule to bar green card holders from US Small Business Administration loans,” February 12, 2026. https://www.reuters.com/world/us/new-rule-bar-green-card-holders-us-small-business-administration-loans-2026-02-12/

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For staffing firms, that mismatch matters as it can push agencies to take on weaker clients, and turn today’s temp‑work slowdown into tomorrow’s credit‑ and collections problem.

Key Takeaways

• Search interest for “staffing agency” now regularly hit index values above 80–100, compared with the 30–50 range in the mid‑2000s.​
  
• At the same time, temp employment has fallen about 22.8% from its March 2022 peak of roughly 3.18 million workers to about 2.45 million in December 2025.​
  
• In South Carolina, temp workers make up about 3.3% of the workforce (≈71,120 workers), with Illinois, Tennessee, Georgia, and New Jersey all around 2.8%–3.2%.​
  

How Is Public Interest in Temp Work Growing?

To see how visible temp work is outside the industry, we looked at Google Trends data for “staffing agency,” “temp work,” and “temp worker” searches in the United States from 2004 through early 2026. Each series is scaled from 0 to 100, where 100 represents the peak search interest over the period. In the early years, searches for “staffing agency” and “temp work” typically sit in the 30s and 40s, while “temp worker” often registers near zero. Over time, search interest for “staffing agency” and “temp work” shows cycles but a general upward drift, with several peaks around 2018–2020 and again in the mid‑2020s.

Search interest around key turning points is particularly telling. For example, “staffing agency” searches surged to an index value of 100 in January 2020, just before the pandemic disruptions, and again in early 2024 and 2025. Searches for “temp work” and “temp worker” also climb to high levels in 2022–2026. Curiosity or concern about temp work is remaining high even as actual hiring is cooling, which can complicate forecasting and business development.

How Has Temporary Help Employment Changed?

The Bureau of Labor Statistics “Temporary Help Services” series tracks monthly employment in temp help from January 1990 through December 2025. The series starts at about 1.16 million temp workers in early 1990 and rises to over 3.1 million at its post‑1990 peak. Employment in temporary help services reached its high point in March 2022 at about 3.18 million workers. By December 2025, employment had dropped to about 2.45 million temp workers, roughly 22.8% below that peak. So, despite a clear uptrend of public interest the number of temp workers is on a downtrend. 

Looking at the latest stretch, the decline from mid‑2025 into year‑end has been steady but not catastrophic. Temp employment slipped from about 2.49 million workers in August 2025 to about 2.45 million in December 2025, with year‑over‑year changes running between about ‑2.2% and ‑3.9% during those months. When you index the series so that January 1990 equals 100, recent readings around 211–215 show that temp employment is still a bit more than double its early‑1990 level despite the recent pullback.

Does Temp Work Still Turn Down Before The Rest of The Labor Market?

Temporary help is widely seen as a leading indicator because employers cut short‑term, assignment‑based roles before they cut permanent staff. The Temporary Help Services series captures this behavior clearly across multiple cycles, including the early‑2000s slowdown, the Great Recession, and the sharp downturn at the onset of the pandemic. In each episode, temp employment dropped faster and deeper than the broader job market, then rebounded more quickly as companies tested demand with temp workers before committing to permanent hires.

The most recent cycle, however, looks different. After surging in 2021 and early 2022, temp help employment peaked in March 2022 and then drifted lower for nearly three years, even without an official recession. This extended slide suggests that employers are quietly trimming flexible labor and squeezing productivity out of existing staff rather than launching broad layoffs. 

Which States Rely Most on Temp Workers?

Temporary work is not distributed evenly across the country. The state snapshot in the dataset ranks states by “share of workforce that are temp worker,” along with total temp workers, full‑time and part‑time shares, and unemployment rates. 

At the top of the list is South Carolina, where temp workers account for about 3.3% of the workforce, or roughly 71,120 people. Illinois, Tennessee, Georgia, and New Jersey each have temp shares around 2.8%–3.2% of their workforces, with total temp workers ranging from about 99,700 to nearly 190,000.

Many of these high‑temp states also have relatively high full‑time shares and modest unemployment rates, meaning temp workers are embedded in otherwise healthy labor markets. At the same time, some large states with big staffing footprints (such as California and Texas) have slightly lower temp shares but very large absolute numbers of temp workers. This creates different types of exposure: smaller states with very high temp shares can experience more concentrated local shocks, while large states can expose staffing firms to big dollar volumes even at moderate temp shares.

Data by State

What Do These Trends Mean For Staffing‑company Credit Risk?

National temp employment is down 23% from its March 2022 peak, yet Google search interest in “staffing agency” remains elevated. This disconnect could create a dangerous dynamic where agencies are extending more credit to weaker clients exactly when those clients are least able to pay. 

Industry data confirms the pressure is building. The average staffing agency days sales outstanding (DSO) now sits at 49 days in 2025, up from a pre-pandemic benchmark of 34–47 days, and 21% of staffing invoices are paid late by 10 or more days. For agencies already operating on tight margins—where payroll accounts for 75–85% of operating expenses—these delays can quickly become existential.​

Industry observers note that clients prioritize their own payroll over paying staffing invoices when cash flow tightens, and seasonal hires often go undocumented, increasing backdoor hire risk. By the time an invoice is 60–90 days overdue, the damage is done: the client is already in talks with other creditors, and leverage has evaporated. 

The problem is compounded by geography. States like South Carolina, Illinois, Tennessee, Georgia, and New Jersey have temp shares above 2.8% and concentrated staffing industry presence. When these regional markets cool, they cool fast and together. 

Financial regulators have documented how concentration risk—particularly in industries and regions experiencing distress—can lead to cascading defaults, where multiple borrowers or clients in the same sector fail simultaneously. An agency with 40–50% of receivables in one high-concentration state faces exactly this domino effect: multiple clients in the same industry all hit cash-flow problems at once, and bankruptcy becomes likely.​

Methodology

This study combines three datasets from temp_workforce.xlsx to describe how temporary work has evolved and what the current downshift implies for staffing-company credit risk.

Data used

Bureau of Labor Statistics (BLS) Data:

• BLS Current Employment Statistics (CES), Temporary Help Services (TEMPHELPS) series, January 1990–December 2025​
  
• BLS Quarterly Census of Employment and Wages (QCEW), all-industry and NAICS 561320 (temporary help services) data by state​
  

Google Trends Data:

• Monthly U.S. search interest for “staffing agency,” “temp work,” and “temp worker,” 2004–2026

Industry Research and Analysis:

• PRN Funding, “25+ Healthcare Staffing Statistics for 2025,” November 2025​
  
• EZ Staffing Factoring, “Staffing Factoring Statistics 2025: Cash Flow Trends and Market Growth,” November 2024​
  
• StaffingDebt.com, “When to Write Off Bad Debt: A Guide for Staffing Agencies,” September 2025​
  
• StaffingDebt.com, “Navigating Seasonal Debt Collection Spikes for Staffing Agencies,” August 2025​
  
• CNBC, “Seasonal hiring 2025 to fall to lowest level since 2009 recession,” September 2025​
  
• CNN Business, “Economic warning sign: Holiday jobs are tougher to find,” December 2025​
  
• Journal Record, “Companies scale back hiring as they brace for recession,” August 2025​
  

Financial Risk Management:

• National Credit Union Administration (NCUA), “Managing Concentration Risk in Credit Unions,” December 2025​
  
• Office of the Comptroller of the Currency (OCC), “Concentrations of Credit,” Comptroller’s Handbook

Preparation and calculations

For the BLS series, the analysis uses levels and simple growth rates (month-over-month and year-over-year) and highlights key turning points by comparing peak vs latest and other anchor months.

For Google Trends, we interpret the indices as attention, not employment. We summarize patterns using time-series charts and compute yearly averages of the monthly indices to smooth seasonality and make multi-year comparisons clearer.

For the state section, states are ranked by temp-worker share of workforce to avoid size bias; counts are referenced to distinguish “high share” states from “high volume” states.

Interpretation boundaries

Google Trends is not a measure of jobs or revenue, and because each term is indexed independently, comparisons across terms are directional and timing-based rather than absolute. The state table is treated as a cross-sectional snapshot suitable for geographic comparison, not a historical state-by-state trend.

The post Which States Rely Most on Temp Workers? appeared first on The Kaplan Group.

How financially healthy is U.S. manufacturing?

Manufacturers are facing mounting solvency pressure, with weaker balance sheets and rising bankruptcy activity.

1. The U.S. manufacturing sector faced mounting financial strain in 2025, as a full 33% of manufacturers are now considered “questionably bankable,” meaning they struggle to secure traditional financing.
2. Corporate distress is rising across the broader economy, with 63 corporate bankruptcies filed in June 2025 alone. 717 companies filed for bankruptcy through November 2025, the highest since 2010. 
3. Balance sheets are weakening as only 46% of manufacturers still maintain a healthy debt-to-earnings ratio below 1.5, down from 52% three years earlier.
4. Across all industries, insolvency pressure is growing, with total U.S. bankruptcy filings up 10% year over year in the first half of 2025.
5. In the auto supply chain specifically, 20.6% of automotive suppliers were already in financial distress before the latest round of tariffs, amplifying risk for OEMs and lenders.
6. Major manufacturers are absorbing large hits, as GM alone booked $1.6 billion in Q3 2025 for supplier contract costs and impairments, reflecting strain in its manufacturing network. GM took an additional $6 billion charge in Q4 2025, bringing total EV-related charges to $7.6 billion for 2025.
7. Credit quality is deteriorating, with commercial business loan delinquencies rising to 1.33% in Q3 2025, up from 1.18% a year earlier.

How are payment delays and cash flow affecting manufacturers?

Cash flow is under intense pressure as manufacturers effectively finance customers through longer terms and rising overdue invoices.

8. Manufacturing cash flow is under intense pressure, with suppliers now waiting an average of nearly 60 days to get paid in 2025, effectively financing customers’ operations.
9. Late payment has become the norm, as 55% of all B2B invoiced sales in the U.S. are currently overdue, reducing predictability for manufacturers and their lenders.
10. Among middle-market manufacturers, 47% of suppliers report that customers regularly pay late, adding volatility to working capital planning.
11. Allowance levels reflect the risk, as manufacturers are maintaining credit allowances that average 1.9% of accounts receivable to cover potential bad debts.
12. Smaller players are hit hardest, with the cash conversion cycle for small manufacturing firms under $300 million in revenue reaching 120 days, nearly twice that of large corporations.
13. Inventory ties up more capital than in prior years, as average days inventory outstanding in manufacturing has climbed to 80 days in 2025, up from 73 days in 2020.
14. Operational efficiency is suffering, with 30% of middle-market businesses saying payment processing times are now a major issue in their financial operations.
15. Across public companies, inefficient working capital management is trapping an estimated $1.7 trillion in cash, much of it sitting in receivables and inventory.
16. In response, financing tools are evolving, with digital factoring platforms now offering manufacturers rate discounts in the 15%–20% range compared to traditional factors, in exchange for faster liquidity.

How are tariffs and trade policy reshaping manufacturing costs?

Tariffs and trade uncertainty are inflating input costs, disrupting supply chains, and dampening demand.

17. Trade policy has become the top macro concern, as 78.2% of manufacturers cite “trade uncertainty” as their number one business risk in Q3 2025.
18. Automakers are particularly exposed, with Ford estimating that 2025 tariffs alone will cost the company about $1 billion, largely through higher input costs.
19. Tariff rates are steep, as the U.S. now applies a 25% tariff on more than $460 billion of imported vehicles and auto parts, reshaping sourcing and pricing decisions.
20. These policies are reshaping supply chains, with ocean freight volumes from China to the U.S. falling between 20% and 50% year over year, cutting throughput for manufacturers dependent on imported components.
21. Input prices are climbing, as manufacturers expect raw material costs to rise another 5.4% over the next 12 months, squeezing margins if price increases cannot be passed through.
22. Cost pressures are widespread, as 68.1% of manufacturers report that their input costs are currently rising, not stabilizing or falling.
23. Automotive production plans are being rewritten, with Stellantis projecting a 19% decline in its North American production volumes due to tariff exposure and cost pressures.
24. At the macro level, tariffs are expected to shave about 0.5% off U.S. GDP growth in 2025, indirectly weakening demand for manufactured goods and investment. The tariff impact on 2026 is projected to be similar (-0.5 pp) or potentially larger (-0.62 pp) depending on the model.
25. Across manufacturing subsectors, most industries are experiencing total input cost increases of between 2% and 4.5% due to the 2025 tariff regime, forcing cuts elsewhere in the budget.

What are margins, valuations, and M&A telling us?

Profitability is under pressure, but high-quality manufacturing assets are still commanding strong valuation multiples.

26. Valuations remain elevated for strong performers, with private manufacturing companies trading at an average EBITDA multiple of 11.1x in the first half of 2025, up from 10.2x in 2024.
27. In the middle market, manufacturing firms acquired by private equity in 2025 are typically valued around 7.2x EBITDA, indicating solid appetite for scalable platforms.
28. Deal structures are shifting, as global M&A volume fell 9% in the first half of 2025 but total deal value rose 15%, reflecting fewer but larger manufacturing and industrial deals.
29. Cost discipline affects pricing, as manufacturers whose costs exceed 42% of revenue tend to receive lower valuation multiples, according to industry benchmarks.
30. Some niches are thriving, as meat alternatives production has seen profit margins expand by 15.8 percentage points, the biggest margin improvement of any manufacturing subsector in 2025.
31. Traditional hardware has bright spots as well, with fire and smoke alarm manufacturers achieving a 7.0 percentage point increase in profit margins, bucking the broader margin squeeze.
32. Deal size matters, as manufacturing transactions in the $100 million–$250 million range are closing at about 10.0x EBITDA, reflecting strong demand for mid-sized assets.
33. Leaving money on the table is common, as manufacturing owners who sold their business without an M&A advisor in 2025 received, on average, 31% less value than those who used one.

How are manufacturers investing and planning for the future?

Capex and strategic plans are turning cautious, even as some tax changes support investment.

34. Capex plans are cooling, with manufacturers now expecting their capital expenditures to decrease by 1.3% in 2025, reversing the 5.2% increase that had been forecast earlier in the year.
35. Most companies are hitting pause rather than expanding, as 63% of manufacturers expect their capital spending to remain flat in 2025, reflecting a cautious stance.
36. Tax policy is a swing factor, as bonus depreciation was restored to a permanent 100% rate in 2025, allowing manufacturers to immediately expense qualifying equipment investments.
37. Interest expense pressure is easing for leveraged firms, as the cap on interest deductibility was reset to 30% of EBITDA in 2025, replacing the stricter EBIT-based limit.
38. Even with headwinds, manufacturers expect production volumes to increase by about 2.5% over the next 12 months, suggesting slow but positive growth.
39. Regulatory reform is a priority, with 79.2% of manufacturers supporting permitting reforms for energy and infrastructure projects, hoping to reduce long-term operating costs.

How expensive and constrained is the manufacturing workforce?

Labor shortages and wage inflation are directly translating into higher costs and lost revenue opportunities.

40. Labor remains a critical bottleneck, as 415,000 manufacturing jobs were unfilled in the U.S. as of mid-2025, limiting the ability to ramp up production.
41. Labor is also getting more expensive, with the average manufacturing employee now costing about $102,000 per year in total compensation, including wages and benefits.
42. Capacity is constrained by staffing, as 20.6% of manufacturing plants report operating below full capacity specifically because of labor shortages, not lack of demand.
43. Skill gaps are widespread, with 60% of manufacturers saying that workforce shortages have a high impact on their productivity, forcing overtime and missed deadlines.
44. Turnover is costly, as replacing a single skilled manufacturing worker now costs between $10,000 and $40,000, once recruiting, training, and lost productivity are included.
45. Growth is being postponed, as 33% of manufacturers have delayed facility expansions because they cannot find enough qualified workers to staff new lines.
46. Demographics are adding risk, with 26% of the manufacturing workforce now aged 55 or older, foreshadowing a wave of retirements and knowledge loss.
    

How is AI reshaping manufacturing efficiency and investment?

AI is moving from pilot projects to core operations, driving massive shifts in quality control, downtime reduction, and capital allocation.

47. Operational reliability is improving, as manufacturers using predictive AI maintenance are reducing unplanned downtime by up to 50%, directly protecting revenue streams.
48. Efficiency gains are quantifiable, with manufacturers reporting productivity increases of 13.8% on average after fully implementing generative AI in their workflows.
49. Quality control is being automated, as AI-powered visual inspection systems are now detecting defects with 99.8% accuracy, significantly outperforming human inspectors who average around 90%.
50. Adoption is widespread but uneven, with 88% of manufacturing leaders expect AI investments to continue or increase.
51. The “smart factory” is becoming standard, as 76% of manufacturers have now deployed at least one AI-driven use case in their production facilities as of late 2025.
52. Return on investment is becoming clearer, with companies that have scaled AI reporting a 2x to 5x return on investment within the first 18 to 24 months of deployment.

Sources

Our sources combine primary economic data, industry benchmarking, and expert analysis to provide a well-rounded view of U.S. manufacturing, B2B payment behavior, and AI adoption in 2025. 

Macroeconomic and policy conditions are anchored by datasets and reports from FRED, Epiq, Yale’s Budget Lab, ISM, and bankruptcy analysts, while sector-specific dynamics come from Wipfli’s manufacturing benchmarking, NAM’s quarterly outlook surveys, and automotive and tariff coverage from S&P Global, Reuters, and trade publications. Working capital, payment delays, and collections risk are documented through Kaplan’s B2B payment study, Deloitte’s middle-market payments research, KPMG and Hackett Group working capital reports, and niche insights on factoring and bad debt from HighRadius and Capital Source Group. Valuation, profitability, and M&A trends draw on FirstPageSage EBITDA multiple benchmarks, IBISWorld industry margin data, and global deal trend analyses from PwC and Forvis Mazars. Finally, workforce and technology transformation themes are grounded in research from The Manufacturing Institute, SCMR, Cargoson, MarketsandMarkets, Deloitte’s Smart Manufacturing Survey, Precedence Research, and MIT Sloan, which together track labor shortages, skills gaps, and the scale and impact of AI deployments across manufacturing.

Links

• https://www.wipfli.com/insights/articles/mrd-tax-op-6-manufacturing-trends-to-watch-as-you-near-the-end-of-2025
• https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/7/63-us-corporate-bankruptcies-in-june-set-up-2025-for-highest-pace-since-2010-91441423
• https://www.epiqglobal.com/en-us/resource-center/news/total-bankruptcy-filings-increased-10-percent-in-the-first-half-of-2025
• https://www.rapidratings.com/post/auto-supply-chain-risk
• https://www.spglobal.com/ratings/en/regulatory/article/north-american-auto-sector-under-pressure-amid-rising-costs-s101650437
• https://fred.stlouisfed.org/series/DRBLACBS
• https://www.dandodiary.com/2025/09/articles/bankruptcy/worrying-signs-in-bankruptcy-statistics/
• https://www.macny.org/u-s-manufacturing-growth-slows-but-remains-positive/
• https://www.kaplancollectionagency.com/business-advice/54-statistics-on-the-b2b-payment-delays/
• https://www.deloitte.com/us/en/Industries/financial-services/articles/b2b-payments-for-the-middle-market.html
• https://www.highradius.com/finsider/how-good-is-bad-debt/
• https://kpmg.com/us/en/articles/2025/working-capital-trends-us-market.html
• https://www.thehackettgroup.com/insights/2025-working-capital-survey-2508/
• https://capitalsourcegroup.com/2025/08/20/invoice-factoring-trends-for-2025/
• https://tedmag.com/nam-releases-q3-2025-manufacturers-outlook-survey/
• https://www.automotivemanufacturingsolutions.com/editors-pick/global-vehicle-production-faces-sharpest-decline-in-5-years/1608720
• https://www.reuters.com/world/us/us-manufacturing-slump-deepens-november-2025-12-01/
• https://blogs.tradlinx.com/how-tariffs-are-driving-facility-closures-and-layoffs-across-u-s-logistics-in-2025/
• https://budgetlab.yale.edu/research/state-us-tariffs-october-30-2025
• https://equitablegrowth.org/tariffs-impact-u-s-industries-differently-with-manufacturing-the-most-exposed/
• https://firstpagesage.com/business/manufacturing-ebitda-valuation-multiples/
• https://www.forvismazars.us/forsights/2025/09/q2-2025-middle-market-m-a-insights-signs-of-potential-recovery
• https://www.pwc.com/gx/en/services/deals/trends.html
• https://www.ibisworld.com/united-states/industry-trends/industries-biggest-profit-margin-increase/
• https://www.ismworld.org/supply-management-news-and-reports/reports/semi-annual-economic-forecast/2025/spring/
• https://www.cbh.com/insights/articles/2025-tax-reform-and-industrial-manufacturing/
• https://nam.org/2025-third-quarter-manufacturers-outlook-survey/
• https://www.cargoson.com/en/blog/how-many-manufacturing-jobs-are-unfilled-in-the-us
• https://themanufacturinginstitute.org/the-state-of-the-manufacturing-workforce-in-2025-20621/
• https://www.scmr.com/article/labor-shortages-remain-an-ongoing-concern-in-many-parts-of-u.s-manufacturing
• https://www.marketsandmarkets.com/Market-Reports/artificial-intelligence-manufacturing-market-72679105.html
• https://www.koerber.com/en/insights-and-events/supply-chain-insights/ai-quality-control-manufacturing
• https://averroes.ai/blog/impact-of-ai-in-manufacturing
• https://standardbots.com/blog/ai-manufacturing
• https://www.deloitte.com/us/en/insights/industry/manufacturing/2025-smart-manufacturing-survey.html
• https://www.coherentsolutions.com/insights/ai-adoption-trends-you-should-not-miss-2025
• https://www.precedenceresearch.com/generative-ai-in-manufacturing-market
• https://mitsloan.mit.edu/ideas-made-to-matter/productivity-paradox-ai-adoption-manufacturing-firms
• https://budgetlab.yale.edu/research/state-us-tariffs-october-17-2025

The post 52 Manufacturing Statistics on Debt, Distress, and Tariff Pressures  appeared first on The Kaplan Group.

This study tracks how small businesses are performing in credit data and how worried owners appear to be, based on what they search for online. The result is a practical state-by-state “health check”.

Key Takeaways

• South Dakota ranks #1 for small business health, with strong credit fundamentals and relatively low stress. 
• Alabama ranks last (50th), with weak credit indicators and some of the strongest stress-related search intensity. 
• Florida, Georgia, Louisiana, and Mississippi all land in the bottom 10, despite being large or growing business markets, signaling that stress is elevated beneath the surface growth story.

How the Small Business Health Score Works

This study builds a Small Business Health Score on a 0–100 scale for each state, then ranks states from 1 (healthiest) to 50 (most stressed). The score blends three types of signals:

• Experian SMB Index – a baseline view of small business conditions at the state level.
• Equifax/PayNet-style credit metrics – lending activity, delinquencies, defaults, and a probability-of-default outlook.
• Google Trends – searches related to “small business problems,” “small business risk,” and “business debt relief”.​

Together, these indicators capture both what is happening in the credit data and how anxious small business owners appear to be.

States with the Healthiest Small Businesses

Top 10 States by Small Business Health Score

The top of the ranking is dominated by Northern and Upper Midwest states with strong credit performance and relatively calm stress. 

• South Dakota (#1) – Highest overall score, reflecting robust lending conditions and some of the cleanest delinquency and default metrics. 
• Montana (#2) – Strong fundamentals and a solid stress profile, with room for entrepreneurs to grow into a supportive credit environment.
• Wisconsin (#3) – High Experian readings and good repayment performance combined with moderate stress searches.
• Maine (#4) and Alaska (#5) – Smaller states with relatively favorable credit metrics and limited distress-topic search intensity.

Other states in the top 10 include Vermont, Minnesota, Iowa, New Hampshire, and Ohio, all of which pair above-average fundamentals with manageable stress 

Bottom 10 States by Small Business Health Score

At the other end of the spectrum, a cluster of states shows weaker credit performance, elevated stress, or both.

• Alabama (#50) – The lowest composite score in the country, reflecting softer Experian conditions and a very weak stress score driven by elevated search intensity.
• Florida (#49) – Despite leading the nation in monthly new business formations, Florida ranks near the bottom on health, highlighting a “high-churn, high-stress” environment.
• Georgia (#48) – Similar story to Florida: strong formation volumes, but the health index flags elevated credit risk and higher stress searches.
• Louisiana (#47) and Mississippi (#46) – Low fundamentals and weak stress scores combine to signal entrenched pressure on small firms.

Other low-ranking states include Oklahoma, South Carolina, Texas, Nevada, and New Mexico, many of which are large, dynamic markets that still warrant a closer look at risk controls.

Fundamentals vs. Stress

Not every weak score means the same thing. Some states look soft because credit fundamentals have already deteriorated, while others look risky because stress signals are elevated before defaults spike.

Plotting each state’s Fundamentals score against its Stress score creates four useful quadrants:

• Strong fundamentals, low stress – Healthiest profile; typical of top-tier states like South Dakota and Wisconsin.
• Strong fundamentals, high stress – Credit looks okay for now, but business owners are worried; potential early-warning markets.
• Weak fundamentals, low stress – Past damage may already be in the data, even if concern is muted; watch for delayed stress.
• Weak fundamentals, high stress – The most concerning quadrant, where both outcomes and anxiety are elevated.

Top 10 States by Fundamentals

This isolates the “hard” credit and performance backbone of the index. Higher means stronger fundamentals.

1. North Dakota — Fundamentals 100.0
2. South Dakota — 95.6
3. Wisconsin — 89.9
4. Iowa — 85.6
5. Montana — 83.1
6. Ohio — 81.8
7. Nebraska — 80.5
8. Minnesota — 77.5
9. Indiana — 75.0
10. Maine — 74.0

Top 10 States by Stress Score

This isolates the search stress component only. Higher means less stress showing up in search behavior.

Low stress states

1. Vermont — Stress score 100.0
2. Alaska — 99.7
3. Maine — 99.7
4. New Hampshire — 99.7
5. Hawaii — 90.6
6. Massachusetts — 90.6
7. Rhode Island — 90.6
8. Connecticut — 90.6
9. North Carolina — 90.6
10. Virginia — 90.6

High stress states

1. Alabama — Stress score 0.0
2. North Dakota — 35.4
3. Florida — 47.7
4. Indiana — 47.7
5. Louisiana — 47.7
6. North Carolina — 47.7
7. Virginia — 47.7
8. Arkansas — 58.4
9. California — 58.4
10. Colorado — 58.4

How to Use This Index

This Small Business Health Score is best used as a comparative benchmarking tool, not a prediction of any one firm’s default probability. The index also complements prior Kaplan Group research on new business formations and business bankruptcies, adding a credit and behavioral stress dimension to the picture of where businesses are starting, surviving, and under strain.

Data By State

Methodology

Data Sources

• Experian SMB Index: Summary state-level indicator of small business health
• Equifax/PayNet-style credit indicators:
  • Lending Index (credit availability / activity)
  • Small Business Delinquency Index (repayment stress)
  • Default Index (realized deterioration)
  • AbsolutePD Outlook (forward-looking risk proxy)
• Google Trends (by state):
  • “small business problems”
  • “small business risk”
  • “business debt relief”

Fundamentals, stress, and the final score

Because the inputs are in different units (indexes, rates, normalized search scores), each variable is standardized across states with z-scores so that no single metric dominates based on its scale. Variables where “high is bad” are flipped so that higher values always mean better health:

• Flipped (bad when high): delinquency, default, PD outlook, and stress-related search terms
• Kept as-is (good when high): Experian SMB Index, Lending Index

Two sub-scores are constructed:

• Fundamentals score: Experian + Lending + (reversed) delinquency, default, and PD outlook
• Stress score: (reversed) Google Trends terms, so higher scores reflect less stress

The final Small Business Health Score is a weighted blend:

Small Business Health Score=0.60×Fundamentals+0.40×Stress\text{Small Business Health Score} = 0.60 \times \text{Fundamentals} + 0.40 \times \text{Stress}Small Business Health Score=0.60×Fundamentals+0.40×Stress.
Scores are then rescaled to 0–100 and states are ranked from healthiest to most stressed.

Limitations

As with any composite index, there are important caveats:

• Data sources may not align perfectly in time; this analysis treats them as comparable recent snapshots.
• Google Trends measures attention and concern, which can be influenced by media coverage as well as real financial stress.
• Rankings are relative, not absolute: a low score means “weaker than peers,” not “doomed.”
• State-level results do not adjust for industry mix, firm size, or business model, all of which can shape risk in ways that are not easily changed in the short term.

The post Which States Have the Healthiest Small Businesses? appeared first on The Kaplan Group.

Key Takeaways

• General office construction (excluding data centers) dropped from a 2019-2020 peak of near $71 billion to around $50 billion in 2025.
• Data center construction has surged from $8.5 billion in 2019 (about 11% of total office) to just over $31 billion by 2024, and was projected to reach about $39 billion in 2025.
• Texas topped all states with about $101 billion in private nonresidential construction spending for 2024.

General Office Construction Trends

Overall private office construction, including data centers, shows a clear arc: strong growth through the 2010s, a pandemic‑era peak, and then a shift in what “office” actually means.

General office spending rose steadily into 2019–2020, reaching its highest levels as employment and corporate footprints expanded. The COVID‑19 shock then changed the trajectory: top‑line office spending stayed high, but demand for new traditional workspace weakened as remote and hybrid work spread, vacancies climbed, and financing tightened.

In the mid‑2020s, total office construction still looks historically elevated in dollars, but much of that strength now comes from data centers. Traditional offices are no longer the clear driver of the category. Instead, the office line increasingly blends a softening conventional office market with a booming digital infrastructure build‑out, masking the underlying decline in demand for new, non‑data‑center office space.

Data Center Construction Trends

While traditional office construction has softened, data center construction has surged, powered by cloud computing, AI infrastructure, and the broader digitization of the economy.

Explosive Growth Trajectory

• By 2019, data center construction had reached roughly $8½ billion in annual spending. That year, data centers represented about 11% of total offices. General office spending was nearly 8 times larger than data centers.

• By the mid‑2020s, data center construction has shifted from a niche subcategory to a core growth engine of the office bucket.
• Year‑over‑year gains in data center spending are double‑digit, far outpacing both:
  • Overall office spending
  • And especially traditional general offices
• 2025 (YTD) – Data centers approach 50 percent share of office construction.

• Data center construction is now almost equal in scale to general office construction for the first time in the history of Census reporting.
• What was once a small line item within the office has become a co‑equal pillar of the category.
• The “office” label now hides two radically different realities:
  • A structurally challenged traditional office market
  • A hyper‑growth, infrastructure‑driven data center segment

Office Construction Trend Without Data Centers

When data centers are removed from the office total, the underlying trend in traditional office (general + financial) becomes clear:

• The late‑2010s upcycle culminates in 2019–2020, after which:
  • Non‑data‑center office spending declines,
  • Even as the topline office category stays elevated thanks to data centers.
• Over 2023–2025 YTD:
  • Total office spending is roughly flat or modestly up year over year.
  • But office excluding data centers is clearly down, indicating that:
    • All of the net growth in “office” is coming from data centers.
• Office without data centers has fallen by double‑digit percentages year over year.

Office Construction Trends by State

Important Data Limitation

The U.S. Census Bureau does not publish state-level data specifically for office construction. State-level data is only available for total private nonresidential construction, which combines office buildings with manufacturing facilities, commercial buildings, healthcare facilities, and other nonresidential categories.

The following analysis uses total private nonresidential construction as a proxy indicator, recognizing that office construction represents a varying percentage of total nonresidential activity in each state.

Top States by Private Nonresidential Construction (2024)

Texas: The Dominant Market

Texas accounts for more private nonresidential construction spending than the next two states combined. At $101 billion in 2024, Texas represents approximately 20% of all U.S. private nonresidential construction activity. 

The U.S. office construction market is undergoing a fundamental restructuring. Traditional general office construction has entered a prolonged decline driven by structural changes in how Americans work, while data center construction has emerged as the dominant growth category within the office construction sector.

Methodology and Data Sources

Primary Data Sources

1. U.S. Census Bureau: Value of Construction Put in Place (VIP) Survey
   • Monthly construction spending data (national level)
   • Annual state-level private nonresidential totals
   • Data available at: census.gov/construction/c30/
2. Federal Reserve Economic Data (FRED): Office construction time series
   • Series: TLOFCONS (Total Office Construction)
   • Series: PROFCONS (Private Office Construction)

Data Notes

• General office and data center construction are subcategories of total office construction
• The Census Bureau began separately reporting data center construction in July 2024, with historical data backdated to January 2014
• State-level office-specific construction data is not published by the Census Bureau
• 2025 figures are projections based on year-to-date data through August 2025

Limitations

• State-level analysis uses total private nonresidential construction as a proxy for office construction trends
• Some historical estimates are interpolated from available data points
• Data center construction figures prior to 2022 are less precise due to reporting methodology changes

The post Are Data Centers Quietly Replacing Traditional Offices in U.S. Construction Spending? appeared first on The Kaplan Group.

Drawing on more than 600,000 recent complaints from the CFPB Consumer Complaint Database, a new report by The Kaplan Group pinpoints where risk is concentrated, which complaint types dominate, and how much of the observed under-performance remains after adjusting for product and issue mix.

Key Takeaways

• Roughly 49.5% of complaints are generated by the top 5 states and about 65.8% by the top 10 states.
• About 30.9% of all complaints are tied to the top 5 companies and 43.4% to the top 10 companies.​
• Most debt collection complaints cluster in a handful of recurring problems, led by attempts to collect debt not owed, with around 46% of the complaints.​

How Concentrated Is Complaint Activity?

We analyzed 630,012 complaints filed between 2021 and early 2026 related to debt collection for U.S. states and DC. Complaint volume is highly concentrated:

• Roughly 49.5% of complaints are in the top 5 states.
• Roughly 65.8% are in the top 10 states.

Company concentration is also high:

• Roughly 30.9% of complaints are associated with the top 5 companies.
• Roughly 43.4% are associated with the top 10 companies.

Complaint volume over time provides a demand signal for when collection pain is rising and whether changes are broad‑based or localized. The peak month is September 2025 with 26,758 complaints.

What Consumers Are Complaining About?

A relatively small set of recurring issues drive a large share of debt collection complaints. ​

Top issues:

• Attempts to collect debt not owed, 45.9% of all complaints
• Written notification about debt, 24.2%
• Took or threatened to take negative or legal action, 11.9%
• False statements or representation, 11.2%
• Communication tactics, 4.6%
  

Top sub‑products:

• Other debt, 19.1%
• Credit card debt, 18%
• Medical debt, 6.8%
• Auto debt, 3.5%
  

Where is Collection Risk Highest?

High‑risk states combine both volume and concentration. The Collection Risk Heat Map turns each state into a 0–100 score of how concentrated complaints are by company and issue.

The highest‑risk states on this index are led by Texas, Florida, California, Georgia, New York, Illinois, Pennsylvania, North Carolina, New Jersey, and Virginia. Those states account for roughly two‑thirds of all in‑scope complaints.

How the Risk Score Works?

The Collection Risk Heat Map is a state‑level index scored from 0 to 100 and designed for prioritization, not causal inference. The index blends three elements:

• Volume pressure: log‑scaled complaint counts so large states do not dominate purely on size.
• Company concentration risk: Herfindahl–Hirschman Index (HHI) on company shares within each state, where higher scores indicate that a smaller number of companies account for most complaints.
• Issue concentration risk: HHI on issue shares within each state, where higher scores indicate a narrower set of complaint types dominates.europa​
  

Concentration matters because:

• A high‑volume state with low concentration can indicate diffuse, system‑wide friction.
• A high‑volume state with high concentration can indicate a narrower set of practices or players driving a disproportionate share of harm, which is often more actionable.
  

Methodology

This report analyzes 630,012 debt collection complaints from the CFPB Consumer Complaint Database for US states plus DC. Records were grouped by State, Company, Issue, Sub-product, and Date received to quantify where complaints concentrate, which topics dominate, and how performance differs across geographies and firms. Time dynamics were measured by aggregating Date received into calendar months and plotting monthly complaint counts to identify peaks and inflection points.

To translate raw complaint volume into a prioritization signal, we built a Collection Risk Index at the state level, scored from 0 to 100. The index is designed for triage and targeting rather than causal inference. It combines three components: Volume pressure, measured as log-scaled complaint counts so large states do not dominate purely due to population size; Company concentration, measured using the Herfindahl–Hirschman Index (HHI) on company complaint shares within each state; Issue concentration, also measured via HHI on issue shares within each state. Higher scores indicate states where complaint pressure is both high and concentrated, which is often more actionable for intervention.

To separate true under-performance from differences in complaint mix, we added a benchmarking layer. We first defined peer segments using Sub-product × Issue and calculated baseline outcome rates for each segment. For each state and for each company within high-risk states, we then computed expected outcome rates as the average of segment baselines implied by that entity’s mix, and compared them to actual observed rates. Benchmarked outcomes focused on operational fields available in the extract, primarily Timely response and Company response to consumers (including “closed with explanation”). The key benchmarking output is the gap measured in percentage points between actual minus expected, which highlights where results are meaningfully better or worse than would be predicted by mix alone.

Limitations

This analysis is descriptive: it surfaces concentrations, patterns, and under-performance signals but does not claim causality. The latest month in the data appears partial, so month‑over‑month movements at the tail should be treated as ingestion‑limited rather than interpreted as real improvement.

Closed with explanation is treated as a closure posture signal, not a quality judgment; whether this is “good” or “bad” depends on internal policy and the distribution of relief outcomes in each portfolio.

The post Which States Drive the Most Debt Collection Complaints? appeared first on The Kaplan Group.

Key Takeaways

• The search interest for “buy now pay later” has stayed at moderate‑to‑high interest since 2020, with the last 12 weeks of 2025 running well above the five‑year baseline (recent average index 73.4 vs. overall 53.6).​
  
• A majority of BNPL users report using it because it was the only way they could afford their purchase, with especially high necessity‑use rates among households with income under $50,000.
  
• Roughly one‑third of BNPL borrowers hold loans with multiple BNPL providers and a majority originated multiple loans in a short period.

How is BNPL demand changing?

From late 2020 to late 2025, search interest in the full phrase “buy now pay later” has remained consistently moderate to high, reflecting widespread consumer awareness and active use of BNPL products. Using Google Trends for the United States, the phrase reached its five‑year peak (index 100) around December 11, 2022, but the more recent pattern shows elevated levels rather than a return to pre‑peak norms.

• Search‑trend overview (2020–2025).
  • Google Trends for “buy now pay later” in the U.S. from late 2020 through late 2025 shows persistent, moderate‑to‑high interest rather than a short‑lived spike.​
  • The phrase reached its maximum index value (100) around December 11, 2022, during a holiday spending surge.​
  • The BNPL acronym starts near zero in late 2020 (weekly values around 0–4) but climbs steadily into double digits by mid‑2021 and then into the 20–40 range through much of 2022–2023, indicating growing industry and media attention.
• Recent baseline shift.
  • Over the last 12 weeks of 2025, the average index level for “buy now pay later” is roughly in the low‑70s, compared with a five‑year average in the low‑50s, indicating a step‑up in everyday dependence on BNPL.​
  • This pattern suggests that households are not backing away from BNPL post‑pandemic; instead, they are normalizing it as an ongoing liquidity tool.​
  • By mid 2025, weekly “BNPL” interest is routinely in the 20–40 range and then accelerates into the 40–70 band, culminating in a peak of 100 in the week of November 30, 2025, which marks its highest recorded level and reflects intense scrutiny and concern around BNPL.

Geographically, the top states for “buy now pay later” search interest skew toward the South, including Mississippi, West Virginia, Arkansas, Alabama, and Louisiana, aligning with regions that also exhibit higher measures of household financial stress and commercial credit risk.

What does the data say about “Ghost Debt” and financial distress?

BNPL‑driven “Ghost Debt” shows up as a large, mostly invisible layer of liability that is both common and heavily concentrated among already‑stressed households. Each datapoint below underscores how often BNPL is used out of necessity, how frequently it is stacked on top of other credit, and how severe financial strain looks by the time problems surface.

• BNPL loans usually remain off traditional credit reports unless they go to collections, meaning large BNPL balances can be invisible in risk models until they are already 90+ days delinquent or in charge‑off status.​
• Federal Reserve research finds that about 55–58% of BNPL users say it was the “only way I could afford” a purchase, with necessity‑driven use especially common among households with low income and limited liquid savings.​
• In 2022, roughly 21% of consumers with a credit record used BNPL at least once, and about one‑fifth of those users were “heavy” borrowers taking out multiple BNPL loans per month, typically on top of existing credit‑card and personal‑loan balances.​
• Regional Federal Reserve analysis shows that nearly all BNPL users who paid late exhibit at least one indicator of financial constraint, and a sizable share of late‑pay users fall into a “severely constrained” category with several overlapping stress markers (e.g., high utilization, low savings, prior delinquencies).​

How does “Ghost Debt” translate into commercial bad debt?

The same households accumulating hidden BNPL obligations are also employees, customers, and owners of small businesses, so their stress quickly “trickles up” into missed invoices and B2B delinquencies. The data points below highlight how personal leverage, tighter bank credit, and a short transmission window turn consumer BNPL strain into commercial bad debt.

• Surveys and credit‑file studies show that small‑business owners with significant personal debts (such as student loans) are about 30–35% more likely to be delinquent on commercial obligations than otherwise similar owners without those burdens.​
• Federal Reserve Small Business Credit Survey data indicate that the share of small firms carrying more than $100,000 in debt remains above pre‑pandemic levels, and existing debt is now a top reason banks deny new credit requests.​
• Case studies and lender reports suggest that when BNPL and other household obligations are prioritized, local businesses can see revenue declines severe enough to trigger missed supplier payments within 30–60 days, creating a short lag from consumer stress to B2B placements.​
• Together, these patterns imply that widespread, under‑reported BNPL use among consumers raises the probability that small firms will miss invoices, contributing to a higher‑than‑baseline rate of commercial accounts entering collections over the following one to two billing cycles.​

“Ghost Debt” as a forward‑looking risk signal

Taken together, the evidence paints “Ghost Debt” as a large, under‑reported layer of leverage that is both widespread and highly concentrated among already stressed households. BNPL use is common—roughly one in five consumers with a credit record have used it—and a significant minority are heavy users stacking multiple loans on top of existing credit‑card and personal‑loan balances.

For commercial creditors, the link is direct: highly leveraged, liquidity-constrained consumers are also customers, employees, and owners of small firms, and their stress flows through into weaker sales, stretched receivables, and higher B2B delinquencies within one to two billing cycles. Monitoring BNPL intensity, necessity‑driven use, and late‑payment patterns by region and segment therefore offers a practical early‑warning system for 2026 commercial defaults, rather than a niche consumer‑finance curiosity.​

Methodology

This analysis combines a digital‑demand signal from Google Trends with consumer‑finance and small‑business data from the Federal Reserve System, the CFPB, and affiliated research to describe how “Ghost Debt” has evolved and how it may influence commercial credit outcomes.

Google Trends was used to track U.S. search interest for the spelled‑out query “buy now pay later” from December 2020 through December 2025, using the standard 0–100 index where 100 represents peak relative interest over the chosen period. Summary statistics include the five‑year peak value and timing, the overall five‑year average index level, and the average index over the most recent 12 weeks to capture any baseline shift in BNPL‑related interest. State‑level interest was examined to identify geographic clusters where “buy now pay later” search intensity is highest and to compare those regions qualitatively with known pockets of household and commercial credit stress.​

On the outcomes side, the report draws primarily on Federal Reserve Board research on BNPL usage motives and financial well‑being, the CFPB’s 2025 report on consumer use of BNPL and other unsecured debt, and the Federal Reserve Bank of Kansas City’s work on financial constraints among BNPL users. These sources provide estimates of the share of adults using BNPL, the fraction who are “heavy” or repeated users, the proportion citing necessity (“only way I could afford it”), and the prevalence of overlapping indicators of financial strain such as low savings, high utilization, and prior delinquencies. Small‑business risk is described using the Federal Reserve’s Small Business Credit Survey—particularly statistics on debt loads above $100,000 and reasons for credit denial—as well as Experian’s analysis of how owners’ personal debts correlate with commercial delinquencies.​

All figures are reported as‑published point estimates or simple percentages, with no additional weighting or causal modeling applied. The analysis is descriptive and exploratory: it does not attempt to estimate precise causal effects of BNPL on commercial default, but instead maps co‑occurring patterns in demand, usage, financial constraints, and small‑business credit outcomes to identify plausible transmission channels and leading indicators for 2026 B2B risk.

The post Is “Ghost Debt” the Hidden Driver of 2026 Commercial Defaults? appeared first on The Kaplan Group.

Key Takeaways:

• The Fed’s shift from a 5.25% peak policy rate in 2023 to the mid‑3% range by late 2025 offers only partial relief, as many borrowers are refinancing into structurally higher-for-longer debt costs than the 2010s.
• A 342% jump in effective tariff rates (2.2% → 9.75%) generated $80.3 billion in new costs by July 2025, creating acute working capital strain in import-dependent sectors.
• Companies outsourcing over half of their 90+ day invoices are 3.8 times more likely to achieve 60%+ recovery rates, highlighting the critical importance of early, proactive collections and technology adoption.

What’s included:

• Credit is tight and debt is more expensive
• Tariffs and higher costs are squeezing margins
• Bankruptcies and defaults are rising, but unevenly
• Small business and CRE remain key risk zones
• Collections speed and strategy separate winners from losers
• Tariff‑exposed, import‑heavy sectors face elevated payment risk
• State and metro “hot spots” for small business defaults
• Benchmarks for AR aging, recovery odds, and write‑off risk
• Survey insights on outsourcing, automation, and collections tech
• Clear 2026 outlook, plus full methodology and data sources

Bottom line for 2026

Risk remains high, and improvement in financing conditions is likely to be slow and uneven. Outcomes will depend on sector, geography, and how aggressively companies manage cash, debt, and collections. Businesses that align capital structure, data‑driven risk monitoring, and strong collections practices will be best positioned to succeed in 2026.

The post What’s the State of U.S. Business Debt Entering 2026? appeared first on The Kaplan Group.

What Are the Typical Payment Failure Rates for SaaS and B2B?

Payment failures are a recurring challenge across SaaS and B2B businesses, driving substantial involuntary churn and revenue losses.

1. Average transaction failure rate across industries: 7.9%
2. Payment failure rates can reach up to 14.7% in certain sectors
3. Failed payments are now the top concern of 40% of subscription businesses
4. For every $1 in actual fraudulent online payments, $25 of genuine online payments are falsely declined.
5. 62% of users who encounter a payment error never return to the merchant’s site, making false declines a major long-term revenue risk.
6. Merchants could lose up to 75 times more revenue to false declines than to actual fraud.
7. Churn from “card declined by processor” is responsible for 2–5% of all lost sales
   

How Significant Is Involuntary Churn in Subscription and SaaS Businesses?

Involuntary churn—customers lost to failed payments—is a major source of lost revenue and has profound effects on long-term growth.

8. Average B2B SaaS involuntary churn rate: 0.8% (out of 3.5% total churn)
9. Healthy SaaS businesses maintain involuntary churn rates below 1–2% monthly
10. Involuntary churn can represent up to 40% of total churn for subscription businesses, with some high-risk sectors reporting rates as high as 48%.
11. 50% of churn in subscription retail results from declined card payments
12. 27% of subscribers cancel immediately after a payment failure due to frustration
13. Subscription-focused businesses can lose 10–20% of annual recurring revenue to involuntary churn
14. Average involuntary churn rate: 1% (compared to 3% voluntary churn)
15. SaaS businesses typically see 1–4% of customers lost monthly to involuntary churn

What Are the Main Causes of Payment Failures?

Payment failures arise from a variety of sources, ranging from insufficient funds and expired cards to technical processing errors.

16. Insufficient funds account for approximately 26% of payment failures
17. Insufficient funds make up over 30% of failed subscription payments
18. The “generic decline” label accounts for around 39% of all failed subscription payments
19. Expired cards are a major driver of revenue churn for subscription businesses
20. Visa cards in payment vaults average ~21 month lifespan, MasterCard ~14 months
21. American Express and Discover cards average ~34–35 month lifespan
22. Visa and MasterCard expiration peaks occur in March and October

How Big Is the Impact of Revenue Leakage and Billing Errors?

Revenue leakage from failed payments and billing mistakes can add up quickly, eroding margins and hurting enterprise and growth-stage businesses.

23. SaaS companies lose an average of 4–10% to revenue leakage annually
24. 26% of global annual revenue is lost to revenue leakage according to RevOps leaders
25. 42% of companies actively experience revenue leakage issues
26. Enterprise companies (1,000+ employees) lose an average of 20% of revenue to leakage
27. For a $10M ARR SaaS company, 7.9% failure rate equals $790,000 in at-risk revenue
28. At a 60% recovery rate, a $10M ARR company still loses $316,000 annually
29. 22.2% of fast-growing SaaS companies lose over 10% of ARR to late payments and defaults
30. Billing errors lead to 61% of late payments
31. 12.5% of manual invoices contain errors
32. Invoice errors can cause 15–20% client churn in subscription businesses

How Effective Are Payment Recovery and Dunning Management Strategies?

Smart retry strategies and effective dunning processes are essential for recovering lost revenue and keeping SaaS cash flow healthy.

33. Top-performing SaaS companies achieve 80%+ payment recovery rates
34. Leading SaaS companies achieve 85%+ recovery rates through sophisticated dunning
35. Well-executed payment recovery strategies recover 15–30% of failed payment revenue
36. Optimized retry strategy can recover 45–70% of initially failed payments
37. Best-in-class SaaS businesses achieve payment recovery rates of 70–85%
38. Companies with optimized dunning recover 70–85% of at-risk revenue
39. Automated dunning systems help recover 40–60% of lost payments
40. Dynamic retries recover 7.8% more purchases (a 36% relative improvement) vs. static retries
    

How Do Payment Failures and Churn Affect Customer Lifetime Value?

Missed payments and churn events have major implications for lifetime value, acquisition cost, and customer support overhead.

41. Average subscription customer stays for 24 months
42. A $50 monthly subscription represents $1,200 in expected lifetime value
43. Involuntary churn can represent up to 30% of total customer churn
44. SaaS Customer Acquisition Cost (CAC) averages $205 and is rising
45. Customer service reps spend an average of 15–20 minutes handling each payment failure inquiry

What Do Healthy Accounts Receivable Practices Look Like?

Maintaining tight aging buckets, minimizing overdue invoices, and streamlining billing processes help sustain profitability and reduce churn.

46. SaaS companies should keep 60–70% of AR in the 0–30 day bucket for healthy cash flow
47. Customers with 60+ day overdue invoices show a 35–50% annual churn rate
48. Staff spend 3–7 days identifying and correcting billing errors
49. 11% of payment delays are caused by the client not receiving the invoice on time
50. Effective dunning systems generate 10–15x return on investment

What Are the Benchmarks for SaaS Renewal and Retention Rates?

Churn and renewal rates act as key indicators for SaaS business health and reveal areas for operational improvement.

51. Average B2B SaaS churn rate: 3.5% (2.6% voluntary + 0.8% involuntary)
52. Overall churn rate hovers near 10% for subscription apps
53. Median first renewal rate for subscription apps: 58% (varies by category)
54. Good renewal rates for B2B SaaS: 80–90%; below 50% signals major problems
55. Annual subscription first renewal rates dropped 13% (from 40.4% in 2022 to 35.3% in 2023)
    

The Kaplan Group has a long history of helping B2B SaaS companies recover revenue lost to failed payments, involuntary churn, and payment disputes. Our unique debt collection process results in an 85% success rate. Whether dealing with auto-renewal compliance issues, payment plan enforcement, or disputed invoices, our team brings deep expertise in SaaS-specific collection challenges

Sources

• GetMonetizely: https://www.getmonetizely.com/articles/understanding-payment-recovery-rate-a-critical-metric-for-saas-financial-health
  
• PayKickstart: https://paykickstart.com/average-failed-payment-rate-for-recurring-payments-ways-to-fix-them/
  
• Payrails: https://www.payrails.com/blog/how-to-resolve-common-subscription-payment-challenges
  
• Paddle: https://www.paddle.com/blog/6-reasons-for-low-payment-acceptance-in-saas
  
• Verifi: https://www.verifi.com/in-the-news/reduce-credit-card-declines.html
  
• Vitally: https://www.vitally.io/post/saas-churn-benchmarks
  
• ClearSale: https://en.clear.sale/blog/strategies-to-combat-false-declines-in-subscription-models
  
• PayProGlobal: https://blog.payproglobal.com/saas-failed-payments
  
• TrueLayer: https://truelayer.com/blog/payments/involuntary-churn-everything-you-need-to-know/
  
• GoCardless: https://gocardless.com/en-us/guides/posts/recalibrate-your-payment-mix-to-reduce-involuntary-churn/
  
• Spreedly: https://www.spreedly.com/blog/reducing-credit-card-declines-expiration-dates
  
• Xfactrs: https://xfactrs.com/revenue-leakage-detection/how-to-check-revenue-leakage/
  
• DigitalRoute: https://www.digitalroute.com/blog/recurring-revenue-statistics/
  
• RatioTech: https://www.ratiotech.com/blog/b2b-collections-best-practices-saas
  
• FlexPoint: https://www.getflexpoint.com/blog/msp-billing/reducing-errors
  
• SlickerHQ: https://www.slickerhq.com/blog/2025-failed-payment-recovery-benchmarks-saas-median-47-percent
  
• Airwallex: https://www.airwallex.com/ca/blog/saas-failed-payments-reducing-international-billing-declines-or-ca
  
• Cleverbridge: https://grow.cleverbridge.com/blog/failed-payment-recovery-dynamic-retries
  
• PYMNTS: https://www.pymnts.com/subscriptions/2023/top-performing-subscription-merchants-recover-60-of-failed-payments
  
• ResolvePay: https://resolvepay.com/blog/7-statistics-every-saas-cfo-should-know-about-ar-aging-buckets
  
• Dock: https://www.dock.us/library/calculate-renewal-rates
  
• Churnkey: https://churnkey.co/reports/state-of-retention-2025
  
• RevenueCat: https://www.revenuecat.com/state-of-subscription-apps-2024/
• Beast Insights: https://beastinsights.com/blog/failed-payment-recovery/ 
• Riskified: https://www.riskified.com/blog/reduce-false-declines/
  

The post Subscription Facts: 55 SaaS and B2B Payment Statistics for 2025 appeared first on The Kaplan Group.

Key Takeaways

• 36.3% of US households carry some form of medical debt (national household-level estimate).
• At the state level, the share of adults with medical debt varies from 2.3% of adults in Hawaii to 17.7% in South Dakota, with a national adult average around 8–9%.  
• $194-$303 billion in medical debt is currently in active collection nationwide

The Burden of Medical Debt on Americans

Medical debt has emerged as one of the most common forms of credit extended to American households. According to the latest data:

36.3% of US households have medical debt, broken down as follows:

• 21.4% have past-due medical bills
• 22.8% are actively paying off medical bills over time to providers
• 16.8% borrowed money (often via credit cards) and still owe loans to pay medical bills

This represents approximately 47 million households carrying medical debt across the country.

The scale of individual medical debt varies considerably:

• Roughly 8–9% of adults nationwide have medical debt today
• 6% of adults (approximately 14 million people) owe over $1,000 in medical debt
• 1% of adults (approximately 3 million people) owe over $10,000 in medical debt
• The median medical debt among those who owe is estimated at $1,500-$2,000

Collections Activity

Total medical debt in active collection is estimated at roughly $194 billion, with estimates ranging from about $194 billion to roughly $300 billion, depending on data sources and methodology. Notably, medical debt has now overtaken non-medical debt as the largest source of debt in collections.

Only a fraction of medical debt appears on credit reports despite widespread collection activity. Credit bureau changes implemented in 2022 removed:

• All paid medical debts
• Medical collection debts under $500
• Medical debts less than one year old

This means traditional credit-based risk models may significantly underestimate the true financial stress consumers face.

Medical Debt by State

State-level analysis reveals geographic variation in medical debt prevalence, with some states experiencing rates nearly eight times higher than others.

• Highest rate: South Dakota at 17.66%
• Lowest rate: Hawaii at 2.30%
• Mean: 9.18%
• Median: 9.01%
• Range: 15.36 percentage points between highest and lowest states
• Southern and Southeastern states dominate the high medical debt rankings, with 7 of the top 10 states located in this region. 

Top 10 States with Highest Medical Debt Rates

1. South Dakota — 17.66% 
2. Mississippi — 15.23% 
3. North Carolina — 13.41% 
4. West Virginia — 13.26% 
5. Georgia — 12.74% 
6. Vermont — 12.23% 
7. Tennessee — 12.03% 
8. Indiana — 11.99%
9. Kentucky — 11.97% 
10. South Carolina — 11.70% 

States with Lowest Medical Debt Rates

1. Hawaii —  2.30% 
2. Washington, D.C. — 2.65% 
3. California 3.89% 
4. Massachusetts 5.11% 
5. Rhode Island 5.16% 

Debt Delinquency vs. Medical Debt Share

Analysis of 11 states with complete delinquency and medical debt data reveals a clear positive relationship between medical debt prevalence and late-stage consumer distress. In this sample, the correlation between medical debt share and a 90+ composite (90 days late + 120+ days late + derogatory) is about 0.345. That’s a meaningful positive link in the expected direction.

• Texas leads this subset with both the highest medical debt rate (10.72%) and one of the highest 90+ day delinquency rate (2.31%), indicating significant financial stress affecting multiple payment obligations.
• California demonstrates the opposite pattern—the lowest medical debt rate (3.89%) corresponds with the lowest serious delinquency rate (1.76%), suggesting its healthcare coverage policies and consumer protections may reduce cascading financial distress.
• Florida presents an interesting outlier: while its medical debt rate (8.74%) is below the national average, it has the highest derogatory account rate (2.56%), indicating severe long-term collection issues.

Medical debt remains a widespread and unevenly distributed burden across the United States, with state-level prevalence ranging from 2.30% (Hawaii) to 17.66% (South Dakota). This dispersion coincides with broader signs of household credit stress.

For collections and credit risk, the implications are straightforward. Higher medical debt environments are more likely to experience heavier late-stage roll rates and deeper derogatory outcomes, which can spill over into small business payment behavior and default conditions. That makes medical debt prevalence a useful contextual indicator when sizing downstream collection risk and planning portfolio strategies.

Methodology

Data sources and scope

• State medical debt share: KFF.
• Delinquency snapshot (11 states): FRBNY Consumer Credit Panel 

Analytical approach

• Computed the 90+ composite per state from the provided buckets.
• Joined the 11-state delinquency panel to the medical debt share table to create a matched set for analysis and visualization.
• Relationship assessment: Computed the Pearson correlation between medical debt share and the 90+ composite in the 11-state matched sample. The observed correlation is ~0.345 (positive and directionally consistent).
• Visuals: Produced a scatter/regression of medical debt share (y-axis) versus 90+ composite (x-axis) to show the slope and dispersion. A complementary ranked table highlights the states with the highest late-stage stress.
• Interpretation: Focused on directional evidence (higher medical debt associated with higher late-stage delinquency), with attention to outliers and counterexamples that indicate the role of policy, insurance coverage, and local credit structure.

The post Which States Are Facing The Most Medical Debt? appeared first on The Kaplan Group.

Who’s covered

The law defines a “freelance worker” narrowly: a person or organization composed of no more than one person (whether incorporated or using a trade name) hired as a bona fide independent contractor to provide professional services for $250 or more — either on a single contract or aggregated with contracts from the same hiring party over the prior 120 days. The FWPA applies to contracts entered into or renewed on or after January 1, 2025.

Written contract requirement

One of the FWPA’s bedrock rules is that contracts must be in writing. A hiring party must furnish the freelancer a signed copy (physical or electronic) and keep the contract on file for no less than four years. That written contract must include, at minimum, key terms such as the parties’ names and mailing addresses, the scope of services and deliverables, applicable rates/fees and the method of payment, the date payment is due (or how it’s calculated), any expense reimbursement terms, ownership of intellectual property, and termination or cancellation terms.

Timing of payment

The FWPA requires hiring parties to pay the compensation set out in the contract on or before the date specified. If the contract does not specify a payment date, the law defaults to payment within 30 days after the freelance worker completes the services. This strengthens predictability for freelancers who historically have faced delayed or disputed payments.

Anti-retaliation and enforcement

The law prohibits hiring parties from discriminating against or taking adverse action toward a freelance worker for asserting rights under the FWPA (for example, seeking payment or enforcing the statute). An aggrieved freelance worker — and in some circumstances the Labor Commissioner or a public prosecutor — may bring a civil action to enforce the FWPA’s provisions. Remedies and penalties depend on the violation and are handled through civil enforcement.

Practical takeaways

If you haven’t already, it’s vital to review your agreements with freelancers and other vendors who may fall under the FWPA’s protections. Check to ensure your agreement addresses all of the required terms, and if you find an agreement is deficient, work to get an updated agreement in place. You’ll also want to update your hiring and accounting teams to ensure everyone is aware of the new requirements and prepared to meet updated obligations if new agreements are being signed.

Sources:

1. Governor Gavin Newsom
2. LegiScan

The post California’s Freelance Worker Protection Act appeared first on The Kaplan Group.