Business Failure is defined by Nasrundin(2020) as business who cannot operate

profitably, leading to default, bankruptcy, or business closure.

In year 2020, the Philippines implemented one of the strictest and longest lockdowns in

the world which disrupt the lives of Filipino people and caused economic recession. As

a city in Philippines and belong in one of the poorest region in the country, it is evident

that Calbayog City economy have been intensely affected. In fact, up until to this day

economic distressed were still felt. Our economy specially those vulnerable sector—the

Small Enterprises are the one that hit particularly hard when this nuisance pandemic

came about.

Studies done prior to pandemic revealed that about 20% of small businesses fail by the

end of their first year. By the end of the fifth year, 50% go under, and by the 10th year,

that number rises to 80%. Although, with COVID-19, the attrition rate has accelerated

substantially. However, during pandemic, entrepreneurs found an alternative way of

selling which is shifting to online selling but unfortunately only those selling essential

products prospered while others did not and even record a loss due to selling non–

essential goods.

There are countless of reason why small businesses failed and the following are just

few of the reason: (1) lack of planning and strategies after the strike of pandemic, (2)

lack in capital or funding due to interrupted cash flow, and (3) low consumer demand

because COVID-19 pandemic made the consumers drastically altered on how and

where they will spend their hard-earned money.

Now that we are in new normal already, economic distressed in small businesses are

undeniable still in it’s trying times. Although Philippine government are in their backbone

for having MSME Law of 2008 authored by Senator Loren Legarda during her 2nd term

as Senator in which it supports Small Businesses by lending initiatives and or giving

subsidies/ financial support. But given the amount of funds being allocated by the

government in Small Enterprises, it is believed that certainly not enough to cover all the

damage caused by pandemic in all small enterprises in the region.

📍 https://www.bworldonline.com/editors-picks/2021/01/04/336974/bounce-back-

msmes/?amp

The article entitled “COVID-19’s impact on MSMEs: What to brace for and how

to cope” by Mr. Adrian Canoza (2020) where they interviewed entrepreneur to share

their views about the small business failures in the Philippines. The article states that

the coronavirus disease 2019 (COVID-19) has greatly affected businesses, especially

micro, small, and medium enterprises (MSMEs), which comprise the majority of all

businesses in the country, due to the economic status of the Philippines during and post

pandemic no cash flow coming in which led the business to fail. According to Mr.

Wieneke in the said article “If we don’t have cash flow, we can’t pay for our rent, we

can’t pay for our inventory, and we can’t pay for labor too.”

This literature is relevant to the present study as it shows one of the factors of

business failure in the country especially in MSMEs sector, where the depletion of
financial resources can be seen and most likely the main reason of small business

failures.

https://www.bworldonline.com/special-reports/2020/04/15/289474/covid-19s-impact-on-

msmes-what-to-brace-for-and-how-to-cope/

This chapter reviews literature on business failures. According to Yin

(2011:63) a literature review seeks to combine a set of knowledge related to a specific

topic, accentuating diverse and progressive logical ideas with regards to the topic. The

focus of this study is the factors which influence the business failure. The review

examines the different perspectives (causal descriptions) under which business failures

have been discussed. The chapter ends with a critical evaluation of conventional

business failure theories as well as lessons that could be learnt from the existing

theories for researchers interested in undertaking similar studies in the Tacloban City

context.

The Literature Review has led to some important conclusions. First, the

theories indicate that the business failure processes are related to certain business

management principles or theories to which business owners need to adhere in order to

stay in business. Second, the review also brings out the fact that the business failure

factors need to be understood in terms of how the principles are interpreted by the

business owner as per the value judgment. Third, there is also the fact that a discussion
of the business failures would not be complete without taking into account the broader

socio-economic environment in which the businesses operate.

The failure of small businesses is the failure idea that will be examined in

this study. When the activities of the business environment result in small business

operations ceasing and/or the company closing down without accomplishing its

objectives, failure may be presumed. Failure, according to Nieman and Nieuwnhuizen

(2009), is the inability to accomplish any particular business goal. It is the reverse of

success because, in essence, it shows that the venture's goal was not achieved.

However, Dimitras, Zanakis, and Zopounidis (1996) concur that failure occurs when a

company cannot pay its debts, employees, shareholders, or suppliers, has an overdraft,

or is legally declared bankrupt. According to Arasti (2011), a failure is the

"entrepreneurial exit, cessation, insolvency, or organizational mortality" of a small

business. As a result, it is possible to draw the conclusion that failure is a situation that

forces a small business to close its doors due to a lack of funding. Failure factors,

according to Yeo (2002), are impediments that might develop from a company's internal

and external environment and have a negative effect on the success of a business.