Best States for Small Business Loans

SBALenders.com released the results of its annual study of best states for small business loans. The report shows that rural states tend to charge much lower interest rates on SBA loans. SBA loans are a good proxy for small business loans, as typically small businesses who cannot qualify for commercial loans will apply for SBA loans, which allows more flexible payment options and lower down payments.

This study demonstrates the best place for a loan may not be large urban banks but rather smaller, rural banks. The average rural population (rural as defined by the Census Bureau) for the ten lowest costs states was 34%, whereas the cost for the ten highest states was on 11% rural. The interest for a $1M loan over a term of 10 years in Mississippi averaged $331,041 versus $434,462 for a borrower in New Jersey, an incredible savings of $103,421 over the term of the loan.

The most affordable small business lending state in 2017 was Mississippi. Average interest rates on all SBA 7(a) loans in Mississippi last year was 5.98%. Mississippi was the only state with rates below 6%. Top banks in Mississippi were Trustmark National Bank, Covington County, and Bank Plus.

The rankings for all states (based on average interest rates charged to borrowers):

2017 Rank2016 RankStateRural PopInt RateAvg Loan
13Mississippi51%5.98%$563,986
25Oklahoma34%6.19%$531,118
37Indiana28%6.20%$530,307
410Arkansas44%6.21%$760,258
54Michigan25%6.22%$397,830
611Wisconsin30%6.22%$458,088
716Nebraska27%6.27%$361,308
89Kansas26%6.30%$460,762
914Ohio22%6.40%$369,013
1017West Virginia51%6.42%$481,461
1121North Dakota40%6.44%$276,440
1229Minnesota27%6.45%$373,125
131Vermont61%6.45%$148,162
1413Kentucky42%6.46%$435,886
1523Washington16%6.51%$570,807
1618Missouri30%6.53%$491,784
1725Georgia25%6.53%$754,015
1822Iowa36%6.54%$405,031
1919Illinois12%6.57%$501,383
2015Louisiana27%6.59%$569,774
2120South Dakota43%6.59%$389,143
2232Montana44%6.61%$434,795
2312Rhode Island9%6.71%$192,600
2424Tennessee34%6.71%$607,639
2534North Carolina34%6.75%$638,804
2637California5%6.76%$587,230
278Connecticut12%6.79%$305,939
2831Idaho29%6.79%$324,277
2935Oregon19%6.80%$535,244
302Maine61%6.81%$221,885
3147New Mexico23%6.85%$423,637
3243Colorado14%6.90%$529,465
336New Hampshire40%6.92%$181,728
3436Arizona10%6.98%$526,248
3528Pennsylvania21%6.99%$395,238
3641Texas15%7.00%$548,469
3739Utah9%7.00%$474,981
3844Virginia25%7.04%$532,498
3948Alabama41%7.12%$496,418
4040South Carolina34%7.13%$674,572
4146Wyoming35%7.15%$393,424
4233Washington DC0%7.19%$507,337
4327Massachusetts8%7.20%$188,519
4449Nevada6%7.24%$461,813
4551Alaska34%7.26%$600,024
4638Florida9%7.29%$452,270
4750Hawaii8%7.34%$260,459
4826New York12%7.39%$279,310
4942Maryland12%7.39%$435,836
5045Delaware17%7.65%$341,811
5130New Jersey5%7.66%$359,595

 

The takeaways from the study for entrepreneurs:

  • Bigger not always better – Small and medium sized banks are very competitive
  • Banks in rural states often provide very attractive rates compared with their urban peers

Methodology of study

SBALenders.com tabulated its results based on SBA loan transactions data from 2016 and 2017 from the SBA’s 7(a) for loans that were 7 years or longer. Other fees, expenses, and charges outside of the interest rate were not included in the tabulations.

SBALenders.com is a resource for entrepreneurs to find the best match for commercial loans and SBA loans. SBALenders.com tracks all loans processed through the SBA 7(a) loan program and provides detailed reports on loan trends so borrowers can quickly find a bank that is a good fit for their financing needs.