Best Cities to Start a Business in the US

LanternUpdated February 9, 2022

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

It may seem like an odd time to launch a small business. But, according to recent data released from the US Census, new business applications have reached historic highs. In fact, new business applications reached a ten-year peak in early October, 2020. That’s a 40% increase compared to the same week in 2019. If you’re one of the tens of thousands Americans curious about starting your own small business, here’s a couple of factors that could be an advantage:

An influx of talent that’s eager to find new work
Increasing ability for some to work online or in digital spaces
Emerging consumer needs that your business could satisfy
The opportunity to vet and pick an amazing location for your business

When it comes to selecting a business’ location, not all places are created equal. Certain factors may help determine the best cities to start a small business and, potentially, increase your chances for success. The characteristics we researched to determine which cities may be better suited for starting a small business include:

Walkability
Cost of living
Median age
Cost of office space

Average household income
Number of locally owned businesses
Employment rates
Percentage change in high propensity business applications (HPBAs)
Time in business*

Monthly sales*

*Based on proprietary data from the Lantern Credit business loan lead form Using the factors noted above, Lantern scored and ranked cities with populations under 500,000. Each ranking factor had a potential high score of 10, for a possible total high score of 100 points. (You can find a detailed explanation of our methodology here.)In the end, the following 15 places emerged as the top cities for small businesses. According to the saying, everything’s bigger in Texas and business opportunity may be no exception. The Lone Star state vaunts a whopping four cities on our list! (This is not to say that there aren’t plenty of other cities where to start a small business, if you’d prefer to set up shop elsewhere.) With a small business loan and the right location in mind, you may be able to make your dream of running a small business a reality. Here’s our list of the 15 top cities for small businesses. Let’s dive into the details of each place.

1. Corpus Christi, TX

Score: 75.8 Scoring high in affordable office space, favorable cost of living, and in businesses with consistent monthly sales, Corpus Christi represents Lantern’s number one spot for starting a small business in Texas. Situated on the beautiful Gulf of Mexico, Corpus Christi features attractive beaches, temperate weather, and plenty of restaurants and outdoor spaces for visitors and residents to enjoy. The Port of Corpus Christi is a hub of industry, lending to a strong local economy and home to the Naval Air Station—providing a year-round potential customer base of military personnel and their families.

2. Lubbock, TX

Score: 75.5 As a bustling college town nestled in the northwestern part of the state, Lubbock shines as one of the best places to start a small business. Home to Texas Tech University, Lubbock boasts a rich musical history, exciting nightlife for the young and young at heart, and plenty of family-friendly recreation—including the Joyland Amusement Park and Science Spectrum and Omni Theater. Lubbock’s affordable cost of living, temperate weather, and plenty of open space makes this Texas city an attractive place to live, work, and play, and one of the best places to start a business.

3. Arlington, TX

Score: 75.1 Sitting squarely between Dallas and Fort Worth, Arlington, Texas, is a sports-lover’s dream. Home to the Dallas Cowboys and Texas Rangers, Arlington offers year-round fun for all from world-class sporting events to thrills and laughs at Six Flags Over Texas. The newly opened entertainment complex, Texas Live!, boasts fine dining, bars, and venues to suit a variety of tastes and interests. Arlington is also home to The University of Texas, Arlington, which was voted as the #1 university for veterans and their families by Military Times in 2020. With so much to do right in the heart of Arlington, affordable living, and plenty of opportunity, it’s an attractive place to start a small business in Texas.

4. Buffalo, NY

Score: 72.5 Gateway to Niagara Falls, home to the popular Buffalo Bills, and the site of a growing craft beer scene are just a few reasons to consider starting a business in New York’s northern city of Buffalo. As a border town, Buffalo offers visitors and residents access to the vibrant Canadian city of Toronto—all with the affordable cost of living of a smaller US city. Featuring four seasons to enjoy everything the outdoors has to offer, and a revitalized, walkable waterfront, Buffalo offers young entrepreneurs various opportunities to cultivate a thriving business!

5. Plano, TX

Score: 71.2 Coming in at number five is the beautiful city of Plano, Texas. As a suburb of Dallas, Plano is accessible to everything the big city has to offer—with the spaciousness of a smaller town. Plano features hiking trails and parks, which could be ideal for families and folks looking to get away from the hustle and bustle of the city. Downtown Plano’s Arts District hosts numerous events throughout the year to celebrate holidays, local food and drink, and community—making it an enticing spot for new business owners to enjoy the thriving city scene.

6. Irvine, CA

Score: 70.9 Beaches, shopping, hiking, and one of California’s most reputable state universities (University of California, Irvine) are just a few reasons to settle into Irvine. With a strong median income, historically high employment rates, and plenty of diversity, Irvine offers business owners a bounty of opportunity. Located in Orange County, Irvine offers visitors access to the fun of amusement parks like Disneyland and Knott’s Berry Farm, or the option to head up the freeway to Los Angeles to see LA’s iconic sites and beaches. Irvine is a safe, family-friendly city that’s less than 10 miles from the famous beaches of Orange County and the world class shopping of the Irvine Spectrum. If starting a business in California is your dream, make sure to check out Irvine.

7. Durham, NC

Score: 70.4 Durham is not your average city. With a celebrated food scene, award-winning universities, and rich US history, Durham, North Carolina, blends the old and the new, the modern and the vintage—with a reputation for celebrating diversity and inclusivity. Rich with entrepreneurial spirit, Durham is known for its close-knit, progressive community. The city’s strong support of black-owned businesses and young entrepreneurs have filled Durham’s streets with shops and eateries. If you’re ready to start your business in North Carolina, Durham is one spot that offers lively, youthful culture.

8. Tampa, FL

Score: 69.4 A recreation destination located on Florida’s gulf coast, Tampa features a stunning Riverwalk, amusement parks, beautiful outdoor spaces, and plenty of delicious food for the whole family. For entrepreneurs looking to start a business in Florida, Tampa offers multiple draws. With four major sports teams and being a departure point for major cruise lines, Tampa is a sought-after destination for people from around the globe—making it a great contender for various kinds of businesses.

9. Pittsburgh, PA

Score: 69 As a historic city of industry, Pittsburgh sits at the crossroads of three major rivers—highlighted by the North Shore, which features sites like PNC Park, Heinz Field, and the Andy Warhol Museum. The city’s 24 miles of scenic riverfront trails are complemented by the iconic stone architecture of Downtown Pittsburgh and its scenic surrounding neighborhoods. Pittsburgh is known for its unpretentious nature, welcoming visitors and business owners to partake in the reimagined cityscape. As a walkable city, Pittsburgh is a strong place for starting a business in Pennsylvania—with easy access to restaurants, shops, recreation, and culture.

10. Orlando, FL

Score: 68.3 Orlando, Florida, is synonymous with amusement parks—like, Walt Disney World and Universal Studios—but it’s also home to several lakes, natural parks, and historic golf courses, which makes Orlando an ideal destination for any age. Its year-round tourism and hospitality sector are an attractive feature for new business owners who value consistent patronage.

11. Raleigh, NC

Score: 67.7 Quality of life, diversity, and pure grit are all cornerstones of Raleigh, North Carolina’s community-driven spirit. These factors also make Raleigh an attractive place for small business owners. If you’re not enjoying delicious fare from Raleigh’s Downtown eateries, you could be hitting the trails at one of the city’s tranquil nature preserves. As the capital of North Carolina, Raleigh is also home to numerous universities, making it an attractive destination for younger folks. Known as the Research Triangle because of the close proximity of three college towns (Raleigh, Chapel Hill, and Durham), Raleigh is a hub for educated individuals of all ages and visitors who want to take in the area’s rich Southern history..

12. Minneapolis, MN

  Score: 67.4 Known as one of the Twin Cities, Minneapolis has become a vibrant center of culture, entertainment, and entrepreneurism— featuring gorgeous lakes and year-round fun. Its 7-mile network of glass-enclosed skyways makes Downtown Minneapolis easy to explore no matter the season, enabling visitors and locals to enjoy the city’s numerous shops and restaurants year-round. Minneapolis is home to folks of all ages who enjoy the outdoors, professional sports (home to the Minnesota Twins and Vikings), and the city’s thriving arts scene. If you’re starting a business in Minnesota, Minneapolis might just be the place to take advantage of all the northern Midwest has to offer.

13. Cincinnati, OH

Score: 68.3 Known for its classic Cincinnati-style chili and Over-the-Rhine District filled with historic architecture, Cincinnati is a classic Midwest town—featuring an affordable cost of living and rich history. Boasting the nation’s oldest baseball team (the Cincinnati Reds) and an NFL team (the Bengals), Cincinnati is also a quintessential sports town. Visitors can enjoy a craft beer along the Ohio River or an afternoon strolling through the famous Cincinnati Zoo and Botanical Garden. For those starting a business in Ohio, Cincinnati offers a central location with easy access to other major cities—such as, like Columbus, Ohio, and Indianapolis, Indiana.

14. Anaheim, CA

Score: 67.1 Rich in cultural diversity and home to some of the nation's most prolific amusement parks, Anaheim is a unique location for starting a business in California. Located in the heart of Orange County (but just a short drive to Los Angeles and the beaches), Anaheim is an appealing location to open a business—with access to everything Southern California has to offer. Anaheim is a shopping and recreation destination that features the Anaheim GardenWalk and world class baseball and hockey teams. Enjoy delicious, homemade street tacos for lunch and then experience fine dining at one of Anaheim’s numerous notable restaurants.

15. Gilbert, AZ

Score: 66.6 If the desert is calling you to start a business in Arizona, then Gilbert could be just the place. With a thriving community anchored by the Heritage District, which is full of foodie favorites and eclectic shops, Gilbert’s proximity to Phoenix makes it an attractive destination for desert-lovers. With a young demographic of working professionals and families, Gilbert offers plenty of opportunities for entrepreneurs ready to share their creative ideas with this blossoming community.

Ready to Start Your Business?

Opportunity awaits for entrepreneurs across the country. And, if you happen to call Texas home, you’ve definitely got quite a few options! Finding the best cities for a small business can take some time, so this guide may serve as a helpful starting point for researching your next venture. Once a business location has been picked out, it’s likely that new business owners will want to evaluate their small business financing options. Money to start your operation can come in the form of small business grants, loans, investments, savings, or any combination of these four. Lantern makes it quick and simple to see your small business loan options—by filling out one application that gives you access to reputable lenders that service small businesses. If eligible, applicants are matched according to their financing needs and qualifications, so they don’t have to waste time chasing after lenders who aren’t a good fit. Get started today to launch your next big adventure!

Methodology

To determine the best cities to start a business, Lantern Credit looked at 50 cities across the US with populations of 500,000 or less. The population refers to the city proper and is separate from surrounding urban areas. Lantern looked at 10 key contributing factors, each assessed on a 10-point scale, for an overall potential score of 100. These factors included: Walkability Walkability was determined by reviewing statistics from Walk Score, which were given on a scale of zero to 100. For this methodology, every 10 points a city received equaled one point for our scale. For example, a city with a walk score of 88, received 8.8 points towards their total Lantern Credit score. Cost of Living Using Area Vibes, Lantern examined the letter grade given to each of the 50 cities and then scored it based on the following scale from 0 to 10:

F = 0 points
D- = 1 point
D = 2 points

D+ = 3 points
C- = 4 points
C = 5 points
C+ = 6 points
B- = 7 points

B = 8 points
B+ = 9 points
A-, A, A+ = 10 points

Median Age Using 2018 data from the U.S. Bureau of Labor Statistics, Lantern determined that a younger demographic (Millennial and Gen X) is likely to spend more on food, apparel, and services when away from home than persons in older demographics. Considering that fact, cities with a lower median age are considered to be more advantageous for small businesses than those with a higher median age. Using Data USA, Lantern also looked at the median age for each of the 50 cities assessed and scored as follows:

Median age 25 - 34 = 10 points

Every one-point deviation below age 25 or above age 34 subtracted 1 point. For example, a city with a median age of 38 would receive 6 points

Average Cost of Office Space Using LoopNet, Lantern assessed all 50 cities using the following filters:

Type of space needed: office, retail, or restaurant
Number of employees: 10 (which equaled 1250 to 4000 sq. ft. of space)

Lantern’s writers then averaged the price per square foot per year for the top 10 results in each city, and scored based on the following scale:

$0 – $5 = 10 points
$6 – $10 = 9 points
$11 – $15 = 8 points
$16 - $20 = 7 points

$21 - $25 = 6 points
$26 – $30 = 5 points
$31 – $35 = 4 points
$36 – $40 = 3 points
$41 - $45 = 2 points

$45 - $50 = 1 point
$51+ = 0 points

Median Household Income Using Data USA, the median household income was assessed by assigning 1 point for every $10,000 of annual income. For example, if the median household income of a city is $35,000, it would receive a score of 3.5 on the Lantern Credit scale. Number of Locally Owned Businesses Using Yelp as a resource, Lantern searched each of the 50 cities for the number of locally owned businesses. For every 10 results a city had on Yelp, they received one point on our scale. Almost every city listed above scored a 10 in this category. Employment Rates Using Area Vibes, Lantern looked at the letter grade given to each of the 50 cities and then scored it based on the following scale from 0 to 10:

F = 0 points
D- = 1 point
D = 2 points

D+ = 3 points
C- = 4 points
C = 5 points
C+ = 6 points
B- = 7 points

B = 8 points
B+ = 9 points
A-, A, A+ = 10 points

Percentage Change in High Propensity Business Applications (HPBAs) High-propensity business applications are those that have a higher chance of turning into businesses with payroll. These are identified based on applications from the IRS Form SS-4 and are known to be associated with a high rate of business formation. These applications may include:

Those from a corporate entity

Those indicating they are hiring employees, purchasing a business, or changing organization type

Those providing first-wages paid dates

Those that have a NAICS industry code in manufacturing, retail stores, healthcare, or restaurant/food service

Data was pulled from the US Census Bureau, comparing week 38 of 2019 to week 38 of 2020. We ranked all 50 cities from greatest percentage increase to least. The first five states received 10 points, states 6-10 got nine points, all the way down to states that ranked in positions 46-50, which received one point.  Years in Business Lantern also looked at proprietary data from the company’s small business loan lead form to score the average time businesses had been in operation, by state. Lantern analyzed thousands of lead forms to determine which states had businesses that had been in operation the longest. To ensure fairness, scores were weighted based on the number of leads per state. All 50 states were then ranked from most years in business to least. States within the top 5 rankings received 10 points. The rest of the states were scored depending on if they were in positions:

6 – 10 = 9 points
11 – 15 = 8 points
16 – 20 = 7 points

21 – 25 = 6 points
26 – 30 = 5 points
31 – 35 = 4 points
36 – 40 = 3 points
41 – 45 = 2 points

46 – 50 = 1 point

Average Monthly Sales Using proprietary lead form data, Lantern assessed the average monthly sales by state. To ensure fairness, scores were weighted based on the number of leads per state. Lantern then ranked the 50 states according to their average monthly sales. States within the top five rankings received 10 points. The rest of the states were scored depending on where they were in the following positions:

6 – 10 = 9 points
11 – 15 = 8 points

16 – 20 = 7 points
21 – 25 = 6 points
26 – 30 = 5 points
31 – 35 = 4 points
36 – 40 = 3 points

41 – 45 = 2 points
46 – 50 = 1 point

Fair Use Statement

Are you looking to start a small business in one of these cities? Or do you know someone looking for the best city to start a small business? Then Lantern encourages you to share this valuable resource with your friends, family, or readers via your website, blog, or other digital media platform. Make sure to link back to this article so they can see the full results!

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About the Author

Lantern

Lantern is a product comparison site that makes it easy for individuals to shop for products and compare offers with top lenders. Lantern is owned and operated by SoFi Lending Corp., the digital personal finance company that has helped over one million people get their money right.

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