As a record number of businesses opened last year, Lendio reveals the top states to start a small business.
2023 was a record-breaking year for small businesses as a record-breaking 5.5 million new business applications were filed in 2023, according to the Small Business Administration.
The 2020s have been one of the most challenging historical decades for small business owners. The economic impact of the global pandemic continues to ripple through the American and global economies. Inflation, high interest rates, and the unprecedented migration of educated workers to new locations have been just a few of the challenges that small businesses face. Amid such paradigm shifts in how—and where—Americans work and live, Lendio commissioned this study to see the state of the small business landscape across the country.
Key Findings
We explored trends in ten metrics that are critical to the success of small business owners in 2024’s rapidly changing and uncertain landscape. These metrics included small business lending, cost of living, real estate data, educated worker migration, corporate tax rates, state-level incentives for business owners, and more. Our key findings include:
- Top states – Florida, Texas, and North Carolina rank top in our list due to lower taxes, an influx of movers to these states, sufficient business funding, and higher amounts of personal consumption expenditures.
- Bottom states – Hawaii, New Hampshire, and Nebraska are the bottom three states, due to low business funding and venture capital availability, limited local incentive programs, high tax rates, and high cost of living.
- Ranking shifts – While the states that made the top 10 stayed the same from Lendio’s 2023 analysis, there were some shifts in the line-up including Florida edging out Texas for the top spot.
- Ranking factors – The states that rank highest are those that experienced large influxes of migration, with reasonable costs of living. The availability of business funding, venture capital, and local incentive programs were also important factors that impacted the rankings.
Top 10 best states to start a small business.
10. Oklahoma (Previously 7)
This state boasts some of the most favorable local incentives in the country for business owners, with 84 inventive programs in total. Housing prices and cost of living are lower, compared to other states. Combined with a low, 4% corporate income tax rate, this creates an environment many entrepreneurs will find attractive. On the flip side, businesses in Oklahoma have lower-than-average access to capital and have seen a decline in educated workers moving to that state.
9. Utah (Previously 10)
Businesses in the state of Utah have exceptional access to capital. Utah is approved for the highest number of SBA loans per 100,000 population in the U.S. It also had $10,000 in VC funding per $1 million GDP, ranking No.10 in the U.S. in 2023. The state also has a lower corporate tax rate of 5% and offers 34 tax incentives to small businesses. The reason Utah did not rank higher on our list is that it has become an increasingly popular destination, and as a result, housing costs have increased significantly.
8. Massachusetts (Previously 4)
It’s no wonder tech-savvy Massachusetts gets the most amount of venture capital disbursed per $1 million of GDP, ranking No. 1 in the U.S. The state offers 73 different incentives for business owners. Massachusetts businesses also have one of the highest five-year survival rates of 57%. On the flip side, it has one of the highest median housing values in the U.S., and it is seeing more people leaving (57,000)—rather than moving to—the Bay State.
7. Georgia (Previously 9)
Georgia is also a great place for businesses, as it is within the top states with the most small business loans approved—over 30 small business loans per 100,000 residents through Lendio’s marketplace. Georgia has seen an influx of 81,406 people move in, making it the sixth-best state in this crucial category. Although the housing prices remain reasonable, Georgia has the second-highest growth in cost of living.
6. Ohio (Previously 3)
Ohio has no corporate income tax rate. Even with the state’s gross receipt tax rate, which is not strictly comparable to the corporate income tax rate, it’s still considered a low-tax state. Ohio is also among the top states that have small business loans approved per 100k residents. With very low housing costs and good local incentive programs for businesses, Ohio is a good place for small businesses to settle.
5. South Carolina (Previously 8)
Half of all startups in the Palmetto State have survived at least five years, and the state government offers 77 different incentives for small business owners—only three states offer more incentives than South Carolina. The state has a low 5% corporate income tax rate. In addition, housing prices and cost of living are among the lowest of all states, and 84,030 people moved in in 2022, making it the 4th-hottest place to relocate.
4. Colorado (Previously 6)
If you are in Colorado, you may have a good chance to land a small business loan. Colorado ranks No. 7 in the U.S. for issuance of small business loans, with 27 small business loans per 100,000 residents. It also has the 7th highest amount of venture capital per $1 million GDP. With 55,768 educated workers moving here and a 4% corporate income tax rate, business owners can find a good place to start a small business.
3. North Carolina (Previously 5)
North Carolina has been a hot place for in-migration, with 99,796 people relocating there in 2022 (the 3rd highest in the U.S.). Businesses here have an above-average, five-year survival rate. The state also has a low corporate tax rate of 2.5% and above-average access to business loans. With low housing costs, business owners find it an attractive location to start and run a small business.
2. Texas (Previously 1)
Texas ranks as the second-best state for small businesses. While Texans receive a lower amount of SBA loan approvals/100K residents than other states, they were the 7th highest state for loans offered through Lendio’s marketplace. Of all businesses started in 2017 in the state, more than half survived five years of operations, outlasting those in many other states. According to Census Bureau data, over 400,000 people with at least some college education moved into Texas in 2022, making it a prime location for educated entrepreneurs to spread their wings. Beyond just workers, Texas has become one of the most popular places for Americans to relocate—thanks, in part, to its lack of a state income tax.
1. Florida (Previously 2)
Florida is the best state to start a business due to a low corporate tax rate (5.5%) and the mass migration of consumers and companies to the state. The Sunshine State sees more than half of its startup businesses survive for at least five years. It’s also a top recipient of SBA loan dollars (12th compared to other states) and ranked 2nd for the number of loan offers facilitated through Lendio’s marketplace.
| State | Rank | 5-year survival rates | SBA per 100K | Lendio marketplace loans per 100K | VC Per $1M GDP | Inventive programs | Corporate income tax rates | Educated worker mobility | Population growth | Median housing costs | Personal consumption expenditures |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Florida | 1 | 50.80% | 23.17 | 37.1 | $6,087 | 41 | 5.5% | 2,130.62 | 318,855.00 | $354,100 | $1,041,880 |
| Texas | 2 | 52.70% | 14.31 | 24.0 | $4,662 | 39 | 1,312.58 | 230,961.00 | $275,400 | $1,302,566 | |
| North Carolina | 3 | 53% | 12.70 | 19.4 | $6,891 | 32 | 2.5% | 1,700.80 | 99,796.00 | $280,600 | $468,160 |
| Colorado | 4 | 49.90% | 26.93 | 25.0 | $12,747 | 38 | 4% | 2,365.96 | 5,376.00 | $531,100 | $292,092 |
| South Carolina | 5 | 50.60% | 13.19 | 20.2 | $2,234 | 77 | 5.0% | 2,099.73 | 84,030.00 | $254,600 | $224,912 |
| Ohio | 6 | 53% | 31.91 | 12.5 | $4,320 | 54 | 888.06 | -9,165.00 | $204,100 | $529,179 | |
| Georgia | 7 | 49% | 17.00 | 31.0 | $2,973 | 49 | 6% | 1,592.28 | 81,406.00 | $297,400 | $465,205 |
| Massachusetts | 8 | 56.70% | 23.34 | 11.8 | $32,800 | 73 | 8.0% | 1,575.66 | -57,292.00 | $534,700 | $353,182 |
| Utah | 9 | 50.50% | 33.06 | 23.4 | $10,705 | 34 | 5% | 1,356.89 | 12,898.00 | $499,500 | $148,611 |
| Oklahoma | 10 | 51.20% | 12.24 | 12.0 | $1,242 | 84 | 4.0% | 1,255.80 | 26,791.00 | $191,700 | $164,074 |
| Virginia | 11 | 56.50% | 12.31 | 15.0 | $5,089 | 63 | 6.0% | 1,836.04 | -23,952.00 | $365,700 | $381,395 |
| Michigan | 12 | 55% | 26.18 | 13.5 | $2,122 | 42 | 6.0% | 828.14 | -8,482.00 | $224,400 | $457,968 |
| Connecticut | 13 | 51.10% | 23.06 | 14.0 | $10,277 | 65 | 7.5% | 2,015.19 | -13,547.00 | $347,200 | $177,408 |
| Pennsylvania | 14 | 54.20% | 16.68 | 13.9 | $5,471 | 81 | 8% | 1,024.34 | -39,957.00 | $245,500 | $623,920 |
| New York | 15 | 49.90% | 21.94 | 17.3 | $15,344 | 69 | 7% | 996.22 | -299,557.00 | $400,400 | $923,029 |
| North Dakota | 16 | 51% | 17.60 | 10.1 | $1,107 | 65 | 3% | 1,470.04 | -2,710.00 | $243,100 | $39,866 |
| Wyoming | 17 | 48% | 14.04 | 39.7 | $16,150 | 21 | 2,022.58 | 2,152.00 | $292,300 | $28,567 | |
| Arizona | 18 | 49.60% | 17.22 | 22.8 | $3,230 | 23 | 4.9% | 2,149.83 | 70,984.00 | $402,800 | $318,201 |
| Alaska | 19 | 57.30% | 18.41 | 10.9 | $1,813 | 31 | 5.3% | 2,303.09 | -6,126.00 | $336,900 | $36,682 |
| Maine | 20 | 53.20% | 28.87 | 10.4 | $1,304 | 44 | 7% | 1,697.54 | 11,600.00 | $290,600 | $66,048 |
| California | 21 | 53.80% | 18.71 | 26.7 | $28,232 | 47 | 9% | 976.00 | -343,230.00 | $715,900 | $1,802,396 |
| Minnesota | 22 | 57.60% | 31.02 | 8.6 | $5,069 | 47 | 9.8% | 1,100.50 | -19,400.00 | $314,600 | $266,445 |
| Vermont | 23 | 50.30% | 25.33 | 7.3 | $13,481 | 44 | 7.2% | 1,971.23 | 1,141.00 | $304,700 | $30,746 |
| Arkansas | 24 | 49.20% | 10.50 | 10.4 | $1,861 | 60 | 2.7% | 1,260.02 | 18,209.00 | $179,800 | $128,037 |
| Montana | 25 | 54.30% | 16.60 | 13.2 | $4,504 | 49 | 7% | 2,159.93 | 16,003.00 | $366,400 | $55,649 |
| Delaware | 26 | 48.10% | 19.58 | 20.3 | $27,235 | 29 | 8.7% | 2,339.11 | 11,826.00 | $337,200 | $48,856 |
| Nevada | 27 | 47.10% | 20.94 | 36.3 | $5,492 | 24 | 2,184.69 | 20,781.00 | $434,700 | $144,682 | |
| Washington | 28 | 49% | 19.37 | 17.3 | $11,651 | 45 | 2,079.71 | -3,580.00 | $569,500 | $345,506 | |
| Kansas | 29 | 46.50% | 15.34 | 10.7 | $3,619 | 71 | 5.0% | 1,494.93 | -7,409.00 | $206,600 | $129,618 |
| Indiana | 30 | 53.10% | 18.77 | 9.8 | $2,091 | 30 | 4.9% | 933.87 | 5,230.00 | $208,700 | $298,717 |
| Illinois | 31 | 55.10% | 17.95 | 17.7 | $10,768 | 41 | 9.5% | 1,095.35 | -141,656.00 | $251,600 | $581,884 |
| Tennessee | 32 | 53.10% | 9.51 | 17.4 | $2,604 | 28 | 6.5% | 1,607.83 | 81,646.00 | $284,800 | $306,354 |
| Mississippi | 33 | 52.10% | 11.43 | 15.3 | $616 | 43 | 4.5% | 952.62 | -5,716.00 | $162,500 | $115,115 |
| Maryland | 34 | 49% | 15.57 | 15.8 | $5,731 | 98 | 8% | 1,518.50 | -45,101.00 | $398,100 | $266,490 |
| West Virginia | 35 | 57.10% | 9.10 | 8.1 | $424 | 55 | 6.5% | 956.91 | 474.00 | $155,100 | $76,209 |
| New Mexico | 36 | 48.10% | 11.21 | 15.3 | $2,294 | 53 | 5.4% | 1,743.17 | -4,504.00 | $243,100 | $86,746 |
| Idaho | 37 | 47.80% | 27.28 | 13.2 | $3,694 | 29 | 5.8% | 1,906.12 | 28,639.00 | $432,500 | $79,171 |
| Missouri | 39 | 44.60% | 15.95 | 13.6 | $2,162 | 46 | 4.0% | 1,202.00 | 5,024.00 | $221,200 | $284,035 |
| Rhode Island | 38 | 49.80% | 22.35 | 10.7 | $3,221 | 51 | 7.0% | 2,034.10 | -5,196.00 | $383,900 | $47,550 |
| Iowa | 40 | 53.80% | 10.60 | 8.5 | $1,106 | 61 | 6.3% | 969.28 | -7,292.00 | $194,600 | $141,784 |
| South Dakota | 41 | 56.10% | 21.43 | 8.3 | $88 | 22 | 1,384.72 | 8,424.00 | $245,000 | $43,659 | |
| Louisiana | 42 | 52.80% | 9.71 | 19.9 | $1,111 | 41 | 5.5% | 828.27 | -46,672.00 | $209,200 | $197,317 |
| Alabama | 43 | 54% | 9.08 | 16.1 | $1,031 | 30 | 6.5% | 1,207.25 | 28,609.00 | $200,900 | $211,183 |
| New Jersey | 44 | 49.50% | 25.14 | 18.1 | $2,787 | 42 | 7.7% | 1,402.75 | -64,231.00 | $428,900 | $440,925 |
| Kentucky | 45 | 52.20% | 10.21 | 7.8 | $525 | 46 | 5.0% | 1,125.15 | 10,420.00 | $196,300 | $192,315 |
| Wisconsin | 46 | 51.90% | 19.40 | 7.5 | $2,950 | 52 | 7.9% | 1,003.75 | 7,657.00 | $252,800 | $271,111 |
| Oregon | 47 | 52.20% | 19.25 | 13.3 | $3,599 | 48 | 7.1% | 1,665.08 | -17,331.00 | $475,600 | $178,845 |
| Nebraska | 48 | 50.90% | 16.48 | 11.0 | $3,042 | 37 | 6% | 1,217.16 | -4,270.00 | $232,400 | $93,515 |
| New Hampshire | 49 | 46% | 32.81 | 12.1 | $5,769 | 19 | 7.5% | 2,106.27 | 6,303.00 | $384,700 | $67,943 |
| Hawaii | 50 | 50.40% | 11.22 | 15.1 | $654 | 21 | 5.4% | 2,228.98 | -15,212.00 | $820,100 | $61,198 |
Final Thoughts
The state where your business operates has a direct impact on your ability to effectively run your company. As an entrepreneur, you get to decide which of these factors matters most to you.
Florida consistently performed in the top tier for business owners, earning it a No. 1 spot for its top small business loan dollars, mass migrations of educated workers and consumers, and reasonable tax rates. Meanwhile, Nebraska, New Hampshire, and Hawaii ranked last, in part because of their high costs of living and housing, fewer incentive programs for businesses, and fewer workers with bachelor’s degrees than many other states.
Wherever you work, each state presents opportunities and challenges. Navigate those factors successfully and you can run a competitive, impactful business. Do the right research. Decide which criteria matter most. Make sure you’ve got the capital to build your dreams. Then take on calculated risk to start something great with products and services that benefit all of us.
Methodology
We used publicly available data from a variety of federal government and nonprofit sources to identify the best and worst states for small businesses in 2024. We used a Z-score distribution to scale each metric relative to the mean across all 50 states. Outliers were reduced to a score of 2 or -2. Overall, we examined ten factors including:
Sources:
Note: In addition to regular income taxes, many states impose other taxes on corporations, such as gross receipts taxes and franchise taxes. Some states also impose an alternative minimum tax and special rates on financial institutions. Nevada, Ohio, Texas, and Washington do not have a corporate income tax but do have a gross receipts tax with rates not strictly comparable to corporate income tax rates.
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