What Are the Best Places to Get a Small Business Loan?
Equally important is finding a place that makes it easy and cost-effective to finance your company’s growth. You can look at data, such as loan approval rates, to get an idea of where it’s easier to get a small business loan. However, you also need to consider the type of small business financing you want. For instance, one state may be a great place to get an SBA 7(a) loan but not a merchant cash advance. To help you make sense of all this, in this post, we’ll explore the best places to get different kinds of small business loans. First, we'll explain what makes one place better than another for obtaining a loan.
How To Use Data to Your Advantage In the Loan Application Process
Several variables converge to make certain locations the best places to get a business loan. While one state may have the highest approval rates, another state will have the largest loan amounts. Therefore, if your main concern is the likelihood of approval and you don’t need large loan amounts, approval rates will be more important to you. However, you should also recognize that approval rates aren’t a perfect representation of approval likelihood. Data may be skewed in certain places because the loan applicants in that area tend to have higher average personal credit scores. For instance, low approval rates in low-income communities don’t necessarily mean you can’t get approved if your finances are strong. Even with these limitations, though, approval rates, average loan amounts, and other metrics can help inform your decision. Before accepting a loan offer, it's crucial that you compare available financing options, online lenders, and their offers. Even if you receive an offer for a loan program for the right amount, you may not be able to afford their monthly payment structure. Instead, you may benefit from seeking a different funding option with repayment terms that better fit your financial needs.
What Are the Best Places to Get an SBA 7(a) Loan?
State by State Approval Rates for SBA 7(a) Loans
Because of their competitive rates and eligibility criteria, SBA 7(a) loans are highly sought after. Of course, this also makes the prospect of getting approved very difficult. Due to this, it's important to know which states have the highest approval rates so you can have a competitive advantage. Fortunately, SBA7A.loans assessed seven years of SBA data to determine each state’s average number of SBA 7(a) loan approvals adjusted for population. Below is what they found:
10 states with the highest number of SBA 7(a) approvals:
Utah
Vermont
New Hampshire
Rhode Island
Idaho
Montana
Massachusetts
Minnesota
North Dakota
Wisconsin
5 states with the lowest number of approvals:
Tennessee
South Carolina
West Virginia
Alabama
Louisiana
State by State Loan Amounts for SBA 7(a) Loans
In addition to approval rates, SBA7a.loans analyzed average loan amounts by state.
3 states with the largest average loan amounts:
State Average Loan Amount
Georgia $670,860
South Carolina $573,613
Arkansas $513,496
3 states with the smallest average loan amounts:
State Average Loan Amount
New Hampshire $152,252
Maine $148,477
Hawaii $99,906
State-by-State Overall Business Environment
As mentioned, individual business loan metrics don’t tell the whole story; there's other financial factors that should be considered. In the real world, small business loans and lenders don’t exist in a vacuum. Average approval rates and loan sizes are a function of the broader business environment. After all, business loan lenders are investors, and investors want to allocate resources where the potential for gain is greatest and the risk of loss is lowest. Therefore, if you're looking for the best states for small business loans, it’ll help to look for the best states to conduct business in general. For that information, you can consult a wide variety of reports from trusted sources like:
The Motley Fool: 10 Best States to Start Your Small Business in 2021
WalletHub: Best & Worst States to Start a Business
Yahoo: Best States for Small Business Owners
Each report uses its own methodology, but the five states that appear in at least two of the reports’ top ten rankings include:
Florida
Texas
Idaho
Utah
Oregon
Conclusion: Easy for Business, Easy for Lenders
As a rule of thumb, states that are small business-friendly will be better places to get small business loans. Generally, the bureaucracy that makes your business's products or services more expensive to sell also makes loans more expensive. Of course, once you’ve considered all the high-level data contained in this post, you must layer in your own knowledge. General business conditions are helpful, but your evaluation of the places for your best business loan options should be specific to you. For instance, the metrics might show Florida as a business-friendly state, but that doesn’t mean it’s right for your company. Brick and mortar cold-weather gear retailers would likely find it impossible to succeed in The Sunshine State. In the end, what matters most is that you’re able to reach your target market. If you can do that, you’ll likely find a small business lender who can help you grow your company the way you want to.