Small business owners in New Jersey and New York respectively are more likely to get approved for a loan than entrepreneurs in any other part of the country, according to a new study of more than 50,000 loan applications on Biz2Credit.com over the last 12 months.
Nearly one-quarter (23.4%) of entrepreneurs in New Jersey had their funding requests approved last year, while New York-based companies had about one-fifth (19%) of their loan requests approved.
New Jersey-based entrepreneurs benefit from the unique combination of high average annual revenues and credit scores while thriving at the same time with its close proximity to New York and Philadelphia.
High operating costs of businesses in New York City, which represented a large percentage of the loan requests, had an unfavorable effect on loan approval rates.
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However, New York-based companies typically have higher revenues and credit scores, and are in business longer, which helps combat the negatives throughout the application process.
Companies in the New York metropolitan area had the highest average revenue ($ 979,674) and were the longest established (76 months). Additionally, business owners in New York had the highest personal credit scores (646). The city’s growth has been fueled by the booming real estate market and construction industry, banking and finance, and New York’s booming technology sector.
Among the biggest surprises in the study was Illinois, which placed third among the top states for small business loan approval percentages. Despite recent reports of Illinois having the lowest credit rating of any state, companies based out of “The Land of Lincoln” had 15% of their loan requests approved. The booming technology sector is driving the local economy.
The Top 10 states by loan approval rates are:
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1. New Jersey (23.4%)
2. New York (19%)
3. Illinois (15%)
4. California (14.2%)
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5. Pennsylvania (12.9%)
6. Florida (11.1%)
7. Georgia (10.2%)
8. Texas (10%)
9. Ohio (8.8%)
10. North Carolina (7.9%)
Regardless of the geographic location, entrepreneurs sit in the driver’s seat in terms of improving the likelihood of being approved for a loan. Lenders want reassurance that the funds they are allocating to borrowers will be paid back in a timely manner. Small business owners can boost their chances by improving credit scores, cash flow and simply getting their finances in order.
Rohit Arora is the CEO and co-founder of Biz2Credit.com, a leading online marketplace that connects entrepreneurs with small business loan options to meet their business financing needs. Rohit was named Crain’s NY Business “Entrepreneur of the Year 2011.”
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