Map shows friendliest states for small businesses

Washington is the friendliest state for small businesses, while Louisiana is the least friendly, a new research shows.

A study released on Monday by Bankrate, a consumer financial services company based in New York City, ranked all the states in the U.S. based on their friendliness for small businesses, which was determined by a number of factors such as labor, business costs, access to capital, and regulations.

The top ten states for small businesses were largely situated in the West; in Washington, Utah, Wyoming, Idaho, Nevada, Florida, Oregon, New Hampshire, South Dakota and Colorado.

The ten least friendly states were Louisiana, Mississippi, Rhode Island, West Virginia, Hawaii, New Mexico, Alabama, Kentucky, Arkansas, and Maryland.

Commenting on the survey, Bankrate Senior Industry Analyst Ted Rossman said in a statement, “Small businesses are often viewed as the engine that powers the U.S. economy, since they account for about two-thirds of new jobs and employ nearly half of all U.S. workers.”

The study “reveals that some states are better positioned than others to promote small business growth,” he said.

Explaining why many states in the West had ranked as more friendly for small businesses, Rossman added in his statement, “Generally speaking, these states are tax-friendly, they have good infrastructure and a more educated pool of prospective employees.”

The ranking was based off six categories to determine whether each state had a good environment for small business to thrive in.

These included “robustness of small business activity, availability and quality of labor, business costs, access to capital, infrastructure and policy and regulation,” according to the Bankrate study.

Washington was ranked first partly because of the prevalence of small businesses in the state, the survey found.

Small business made up for almost half of Washington’s workforce, at 49 percent, as of 2021, according to Census Bureau’s Statistics of U.S. Businesses, the survey found.

It also has a high approval rate of loans for small businesses, and scored high for real gross domestic product (GDP) per capita.

The state also saw the most small businesses open between 2021 and 2022, a total of 29,963.

While 13,419 closed in that same time period, Washington still had a net increase of 16,544 small businesses in one year.

When it came to availability of labor in Washington, the small businesses added a net increase of 161,791 jobs, which was 86 percent of the total jobs opened in the state between 2021 and 2022, according to the Bureau of Labor Statistics data reviewed by Bankrate.

Meanwhile, Louisiana had the greatest shortage of workers and lowest average literacy and numeracy scores for adults across the U.S.

The number of Small Business Administration loans approved was also low in Louisiana, and it was also the only state where the number of small business closures was higher than its openings between March 2021 and March 2022.

Given the greater rate of small business closures, the state also had the second-lowest percentage of total net job creation from small business in the same time period.

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