The current environment for U.S. lower middle market businesses ($5–$50MM revenue segment) remains constrained and conflicted. Newpoint’s proprietary data show growing voluntary chapter 11 bankruptcy filings in the $1-$10MM liabilities range. At the center of this, we are seeing that volatility is high and growing for the construction and healthcare industries. The rest of the core lower middle market industries remain elevated in their distress trends.
Macroeconomics falls in line with bank sentiment. The most recent SLOOS reading shows 6.6% of banks on net still tightening C&I lending standards for small firms, down from the roughly 8% net tightening reported for small firms in Q2 2026 and well below the sharper tightening seen earlier in the cycle.
BANKRUPTCY FILING TRENDS
Here is the big miss for credit tracking. For voluntary Chapter 11 filings in the $1-$10MM liabilities range tracked by Newpoint, year-to-date Sept. 30, ’26 shows 1,660 filings in this category suggesting that 2026 will materially top 2025 in filings. Focusing on specific industries, we highlight the following industries of concern: construction; retail trade; wholesale trade; manufacturing; transportation & warehousing; and healthcare, most notably.
- Key drivers include persistent elevated prices, higher and rising borrowing costs, and broader inflation and geopolitical uncertainty
- Additional industry-specific risk remains elevated across agriculture, construction, manufacturing, retail & restaurant, real estate rental & leasing, and health care – industries of focus and attention for stakeholders heading into late 2026 and early 2027, in line with Newpoint’s client feedback and observations
BANK AND SPECIAL ASSETS PERSPECTIVES
Coincident with the uptick in core lower middle market bankruptcy filings and distortions from tariff and supply chain issues in early/mid 2025, there has been an uptick in special assets officer job postings across regions. Newpoint tracks these listings through proprietary search tools. As shown in the chart below, there was a spike in postings for special assets officers in Q2’25 and Q3’25, with a taper continuing through Q3’26. Newpoint continues to monitor this proprietary data to determine whether it is a rangebound issue or something that will correct itself in coming quarters. But this could be a “missed signal”.
CURRENT CREDIT SIGNALS (SEPTEMBER–OCTOBER 2026)
The most current data point in the same direction as Newpoint’s bankruptcy research: stress is concentrating in smaller companies, while aggregate bank metrics stay calm.
Small business bankruptcies. Per Epiq AACER/ABI data released October 8, Subchapter V elections, the small business reorganization path, totaled 2,442 in the first nine months of 2026, up 46% from 1,672 in the same period of 2025. September alone saw 276 elections, up 38% year over year. Commercial Chapter 11 filings rose 11% year to date to 6,560. September’s 16% year-over-year decline in commercial Chapter 11 filings reflects a high September 2025 base, which included 109 related filings from a single long-term care pharmacy provider.
Private credit defaults. Fitch’s U.S. Private Credit Default Rate reached a record 6.3% for the trailing twelve months ended August 2026, up from 6.1% in July, and has held at or above 6.0% since April. The industries leading defaults line up with Newpoint’s industries of concern. Industrial and manufacturing defaults reached 9.9%, up from 5.2% a year earlier, and healthcare providers also reached 9.9%, up from 6.9%.
Bank lending: available, but expensive. C&I loans at U.S. commercial banks stood at $2.95 trillion for the week ending September 23, up roughly 9.5% from a year earlier (Federal Reserve H.8). On Main Street, the cost of that credit keeps rising. NFIB’s September survey, released October 13, put the average rate on short-maturity loans at 8.2%, up 0.7 points from August.
| INDICATOR | LATEST | PRIOR / YEAR-AGO |
|---|---|---|
| Subchapter V elections, YTD Sept. 2026 | 2,442 | 1,672 YTD 2025 (+46%) |
| Commercial Chapter 11 filings, YTD Sept. 2026 | 6,560 | 5,895 YTD 2025 (+11%) |
| Fitch private credit default rate, TTM Aug. 2026 | 6.3% (record) | 6.1% July 2026 |
| Industrial/manufacturing private credit default rate | 9.9% | 5.2% Aug. 2025 |
| NFIB avg. short-term loan rate, Sept. 2026 | 8.2% | 7.5% Aug. 2026 |
| Bank C&I loans outstanding, wk. of Sept. 23 | $2.95T | $2.68T Aug. 2025 |
Sources: Epiq AACER/American Bankruptcy Institute; Fitch Ratings; NFIB Small Business Economic Trends; Federal Reserve H.8.
Want these insights delivered straight to your inbox? Sign up for our newsletter.
See all previous reportsNewpoint Advisors Corporation is a North American financial advisory firm dedicated to improving troubled and financially underperforming businesses with revenues of $5–$50MM for a fixed fee and on a fixed timeline. Since 2013, Newpoint has recovered $2,105,000,000 in debt and saved 17,162 jobs.
← Insights & News