SBA 7(a) loans are a valuable source of funding for businesses. So far in 2023, the SBA has approved nearly 38,000 loans totaling more than $18 billion, with an average loan amount of $476,046.

SBA loans offer easier approvals and larger loan amounts than many other types of business loans. We’ll break down the best and worst states in the nation for people looking to get SBA 7(a) loans and discuss the loans that have been approved in each state.

Key takeaways

  • The SBA 7(a) loan is the most common type of SBA loan
  • The SBA publishes approval data based on several factors, including number and size of approved loans, broken down by state
  • Most SBA funding goes to large, populous states, including California, Texas and Florida
  • States with the lowest SBA funding amounts include North Dakota, Hawaii and Vermont

The best states for SBA 7(a) loan approval

The SBA 7(a) Summary Report publishes data about SBA loan approvals, breaking down approvals using a variety of categories. For example, you can see approvals by gender of the applicant, business size, whether the company is rural or urban or by state.

We looked at data for approvals in 2023 up to 6/15/2023 to compile this list.

1. California

Total number of approvals: 4,041

Total loan amount: $2.47 billion

It’s no surprise that California is the number one state on this list. It has a strong reputation for innovative businesses and is also the most populous state in the nation. Borrowers in the state have raked in 13.6 percent of the SBA’s loans this year.  This is down slightly from 2022, when California accounted for 14 percent of SBA borrowing.

California’s population represents 11.66 percent of the US population, so they’re borrowing above their weight. But when you account for the high cost of living and related high costs of business, the large amount of borrowing is understandable.

2. Texas

Total number of approvals: 2,621

Total loan amount: $1.79 billion

The Lone Star State is the next biggest borrower of SBA loans, taking in just under $1.8 billion so far in 2023. That’s 10 percent of the total amount lent through the SBA 7(a) program at this time. Like California, Texas is highly populous, representing about 9.14 percent of the American population. It also has a high growth rate, coming in as the third fastest-growing state, and is home to the best place to live in the U.S., Round Rock.

Texas consistently ranks in the top five states for SBA lending. In 2022, the state took in 10.9 percent of the SBA’s funds, with businesses receiving just over $2.8 billion in SBA 7(a) loans.

3. Florida

Total number of approvals: 2,936

Total loan amount: $1.47 billion

If you’ve noticed a trend by now, you shouldn’t be surprised that Florida, the Sunshine State, is number three on this list. The third-most-populous state in the U.S., with 6.79 percent of the population, took in 8.1 percent of the SBA’s total lending so far in 2023. It’s also one of the best states for retirees.

Florida is another state experiencing significant population growth, seeing 1.24 percent growth year over year, making it the eighth-fastest growing state in the US. It’s also a consistently high ranker in SBA loan statistics. In 2022 it received $1.953 billion in SBA loans, about 7.6 percent of the SBA’s lending for the year.

4. New York

Total number of approvals: 2,681

Total loan amount: $798 million

New York, the fourth-most populated state in the country, is number four on the list, taking in $794 million in SBA loans so far in 2023. But this is a big drop from Florida, the number three ranked state, which brought in about $673 million more so far this year. The average loan in Florida totaled just over $502,000, while the average loan in New York was just $298,272.

New York typically falls in the top ten but with much lower borrowing rates than some other states. In 2022, companies in the state received SBA loans totaling $1.06 billion, roughly half the amount Floridian companies did.

5. Georgia

Total number of approvals: 1,085

Total loan amount: $775 million

Georgia is the first state on this list to break the trend of high-population states getting the most funding. Georgia is the eighth-most populous state in the country with 3.31 percent of the population but accounts for 4.3 percent of the SBA’s 7(a) loan funds.

The state is a consistently high performer. In 2022, it received the fourth-highest amount of funds from the SBA at $1.16 billion. It also tends to have large loans on average, with an average loan size of $712,352, dwarfing the overall average of $476,046.

The worst states for SBA 7(a) loan approval

Not every state gets a lot of funding from the SBA 7(a) loan program. Here are the states that have borrowed the least.

1. North Dakota

Total number of approvals: 52

Total loan amount: $22.56 million

North Dakota is the lowest-ranking state by SBA loan funding, receiving just 52 loans so far, for a total of a bit more than $22 million. It’s not surprising that the state hasn’t seen many approvals given its relatively low population.

The state consistently ranks at the bottom. In 2022, it only had approved loans totaling $35 million, a steep drop from the $85.4 million it received in 2021.

2. Hawaii

Total number of approvals: 95

Total loan amount: $29.65 million

Hawaii may be a tropical paradise, but it may not feel that way for local businesses, which received the second-least amount of SBA lending of any state. Businesses on the islands received just 0.2 percent of SBA 7(a) loan funds despite having 0.43 percent of the nation’s population.

Hawaii is known for its high cost of living, which can make it difficult to start a new enterprise. But things might be looking up as this second-to-last ranking is a step up from the past two years, where it was ranked 50th out of the 50 states.

3. Vermont

Total number of approvals: 114

Total loan amount: $30.48 million

This small New England state ranks third-to-last in SBA lending so far this year, with just 114 approvals for the state’s 647,000+ residents. Its average loan totaled just $267,394, well below the overall average of $476,046.

This low rate of lending may make sense, given the geography of the state and its relatively low population density. The need to borrow large amounts to start a company in a big city just doesn’t exist in much of the state.

4. South Dakota

Total number of approvals: 89

Total loan amount: $31.59 million

Like its northerly relative, South Dakota is a sparsely-populated state that hasn’t seen much in funding from the SBA loan program. The state has moved from its 2022 position when it was the second-worst state for SBA 7(a) lending, but it’s still only taken in just 0.2 percent of the program’s loaned amount this year.

5. Wyoming

Total number of approvals: 51

Total loan amount: $41.46 million

The Cowboy State rounds out the bottom of the list, bringing in close to $41.5 million so far in 2023. Though it has beautiful mountain views, the state doesn’t set any records for SBA borrowing, receiving just 0.2 percent of the program’s funds.

While Wyoming’s ranking is the same as in 2022, the state is close to surpassing the $48 million in SBA 7(a) loans it brought in last year.

How to get an SBA 7(a) loan

The SBA doesn’t offer loans directly. Instead, it partners with lenders that want to offer SBA loans. The SBA insures loans, reducing the lenders’ risk and allowing them to offer easier approvals and larger loan amounts. And since the SBA sets a maximum rate that lenders can charge, SBA interest rates can be much lower than traditional and high-risk loans.

The first step in getting an SBA loan is finding a lender. One way to do this is through the SBA’s Lender Match, which can help you find lenders in your area. You can also contact lenders to see if they offer SBA loans.

Applying for an SBA loan can take some time and you’ll need to meet various requirements regarding business size and ability to repay the debt. Submit your application, along with any supporting documents, and wait for the lender to make an approval decision.

Bankrate insight

High-risk loans are an option for business owners with bad credit and businesses that have not been operating long. You can find them with online lenders, though some banks and nonprofits may also offer financing to risky borrowers, especially those in underserved communities.

Alternatives to SBA 7(a) loans

SBA 7(a) loans are just one source of funding available to small businesses, but they’re not perfect for all situations. You can also consider these alternatives, which may be a better fit for your needs.

SBA microloans

 SBA microloans are loans for amounts less than $50,000. The average loan is $13,000. They often take less time to get than a 7(a) loan due to their smaller amount and can be used for most purposes, like working capital, inventory and machinery purchases. Compared to other types of SBA loans, approval rates for microloans are more favorable for underserved and minority communities. In 2021, Nearly 41% of the 4,400 microloans (totaling $71.8 million) went to underserved communities.

Business lines of credit

A line of credit is far more flexible than a 7(a) loan, giving your business access to a pool of cash that it can pull from as needed. You only pay interest on your outstanding balance. If you have unpredictable funding needs, a line of credit can offer flexibility. But like most business loans,  line of credit rates can get high depending on factors like creditworthiness and time in business.

Working capital loans

Working capital loans are designed specifically for companies facing a cash crunch. That means they usually offer quick approvals and funding, something that SBA loans typically don’t. These may be a better fit if you need quick cash to cover a shortfall or take advantage of an opportunity.

Business credit cards

A business credit card is another type of short-term financing. They often have perks you won’t find with most loans. This includes cash back or other rewards and interest-free financing for short periods. If you can’t pay your balance in full each month and have great credit, a low-interest business loan could be a better option that could save you money.

Invoice financing or factoring

Invoice financing or factoring lets you get paid for invoices more quickly instead of waiting for your customers to pay up. The main benefit is that they’re usually easy to qualify for as long as your invoiced clients have good credit and history of paying on time. But they can be expensive because you usually give up a percentage of each invoice’s value.

Merchant cash advances

A merchant cash advance is a type of short-term loan you can use for business-related issues like buying inventory or covering a short-term cash shortfall. You pay the loan back automatically by sending a percentage of each day’s sales to the lender.

MCAs are one of the most accessible types of business loans for bad credit. Approval rates are higher than many other types of loans, including SBA loans. But interest rates are also high, and you could end up in a cycle of debt if you can’t pay the loan off quickly.

Bottom line

SBA 7(a) loans can be a valuable source of funding for small businesses. Regardless of where you live, if an SBA loan could help you start or expand your company, consider applying for one or another type of business credit.

Frequently asked questions

  • In 2022 Live Oak Bank was the largest SBA lender, originating 1,517 loans for a total of $2.291 billion, an average of just over $1.5 million per loan. Huntington National originated the most SBA loans at 4,534, for a total of $914.4 million.
  • To get an SBA 7(a) loan, you must have sufficient revenue to pay the new loan. At the same time, you must qualify as a small business, which means remaining below revenue limits that vary by industry. For example, general automotive repair businesses can’t make more than $9 million per year. The SBA offers an interactive tool for learning more about size standards by industry.
  • The typical down payment requirement for an SBA 7(a) loan ranges from 10 percent to 30 percent.