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.