The pandemic not only dislocated and shuttered many small businesses, but it also created a surge in applications for new businesses, as social distancing and working remotely took hold, according to a report by the small business website lendio.
Citing Small Business Administration data, the lendio report noted that more than 10 million small businesses, with annual revenue reaching $13.3 trillion, opened from 2021 to 2022. Also, one in five startups fail within the first year of being open and close to 50% fail after five years. Also, about 65% are out of business by the 10th year, according to the Bureau of Labor Statistics.
"The 2020s has been one of the most challenging decades in history for small business owners," lendio said. "The economic impact from the global pandemic continues to ripple through the American and global economies. Inflation, remote working, and the unprecedented migration of educated workers to new locations have been just a few of the challenges that small businesses faced."
The life span of your business is in many ways determined by the state in which you live and operate, according to an analysis by Lendio. The states with large influxes of migration, reasonable cost of living and local incentive programs tend to be favorable for small businesses, according to the analysis by the Utah-based online loan marketplace for small business owners. Lendio analyzed factors such as tax rates, startup survival rates, cost of living, educated worker migration, loans, funding, consumer spending, and incentive programs to rank which states are best to start a small business.
Lendio used a variety of data from the federal government and nonprofit sources including from the Bureau of Labor Statistics, Census Bureau, Small Business Administration, Council for Community and Economic Research, the Tax Foundation, Bureau of Economic Analysis and the National Science Foundation.
Here is Lendio’s list of the 10 best states to run a small business:
10. Utah
Utah ranks second in approving small business loans, with 12.6 million per 100,000 residents. It also ranked seventh in the amount of venture capital disbursed per $1 million of GDP in the U.S. in 2022 ($15,000). More than half (51.5%) of the state’s startup businesses survive to at least five years. Lendio’s analysis also showed that the Beehive State has seen a 16.3% annual cost-of-living increase, the biggest in the country, as a result of the influx of residents.
9. Georgia
The Peach State has a high rate of small business loans approval, with 10.6 million per 100,000 residents. It also ranks sixth for the number of people moving into the state (81,406). The state has the second highest growth in cost of living, even as the median price for a home is relatively low ($249,700).
8. South Carolina
South Carolina’s small business owners receive the third-highest number of incentive programs (77) from the state government and half of the state’s startup businesses survive to at least five years. The Palmetto State is the fourth most popular relocation destination. It also has a median housing cost of $213,500 and low cost of living.
7. Oklahoma
Oklahoma’s small business owners receive a high number of incentive programs (75) from the state government. The Sooner State has a median housing cost of $168,500 and low cost of living. It also has a corporate tax rate of 4%.
6. Colorado
Colorado has the highest number of small business loans approvals with 13 million small business loans per 100,000 residents. Half (50.6%) of the state’s startup businesses survive to at least five years. The Centennial State also has the sixth highest amount of venture capital per $1 million GDP ($16,125.93).
5. North Carolina
The Tar Heel State has an above average startup businesses survival rate ($53.90) over a five-year period. It ranks third in the number of people who relocated there in 2022 (99,796). The state also has median housing cost of ($236,900), and it has a relatively low corporate tax rate at 2.50%.
4. Massachusetts
The Bay State tops the list in the amount of venture capital disbursed per $1 million of GDP ($57,498.28). It offers 74 different incentives for business owners, and it has a high rate of small business survival beyond five years (55%).
3. Ohio
The state has a high rate of small business loans approval with 8.8 million per 100,000 residents. More than half (53.1%) of the state’s startup businesses survive to at least five years. The Buckeye State has no corporate income tax rate. It also has low housing costs, with a median housing value of $180,200.
2. Florida
The Sunshine State is the top relocation destination, with an influx of 318,855 people. It’s also has the 11th highest amount of small business loans approved per 100,000 residents. Slightly more than half (50.1%) of its startup businesses survive to at least five years.
1. Texas
Texas has become one of the most popular places for Americans to relocate. It had an influx of 230, 961 people. The Lone Star State does not have a corporate income tax. It has 9.3 million small business loans per 100,000 residents. The state also sees more than half of its startup businesses survive at least five years of operations.
The full report can be viewed here.
