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Although it is known as the home to some of the country’s biggest and most successful corporations (Amazon, Cisco, eBay, PayPal, Adobe and others), San Jose is the “Best Small Business City in America,” based on average annual revenues in 2021, credit scores, age of business, and Biz2Credit’s proprietary BizAnalyzer score. It’s the second year in a row that San Jose has come out on top in Biz2Credit’s annual ranking.

Biz2Credit factors in the local business climate, including rents, labor costs and local tax rates in examining the financials of over 82,000 companies that applied for small business loans in 2021, including companies that applied for PPP loans.

According to Biz2Credit’s new study, the Top 10 Best Small Business Cities in 2021 were: San Jose, Baltimore, New York, Boston, San Francisco, Los Angeles, Washington, D.C., Portland, OR, Providence, RI and Denver.

With Silicon Valley thriving, it is no surprise that San Jose has repeated as No. 1 among the Top 25 Best Small Business Cities for 2021. Other tech centers, including New York, Boston and San Francisco also fared well.

Baltimore and Washington, D.C. moved up the list dramatically, which is likely the result of an increase in the number of businesses that serve the growing federal workforce. Among the top 10 metropolitan areas, the leading industries were: professional, scientific, and technical services; retail trade; and construction.

Overall, average annual revenues for small businesses in 2021 declined to $539,000 from $689,000 in 2020. This reflects the impact of the economic toll that the coronavirus had on small businesses, many of which had to close due to pandemic mitigation efforts.

Average credit scores for business owners decreased from 617 in 2020 to 604 in 2021. Clearly, the pandemic had an impact on credit scores.

In addition, some businesses that benefitted from PPP money in 2020 did not receive it in 2021. As operations resumed after COVID-related shutdowns, the cost of doing business went up, which hurt business owners’ credit scores.

For this analysis, Biz2Credit defined “small businesses” as companies having fewer than 250 employees or less than $10 million in annual revenues. The Top 25 Cities for Small Business in 2021 are:

2021 Rank (2020 Rank)

1. San Jose (1)

2. Baltimore (13)

3. New York (7)

4. Boston (5)

5. San Francisco-Oakland (6)

6. Los Angeles (4)

7. Washington, D.C. (12)

8. Portland (16)

9. Providence, RI (Unranked)

10. Denver (14)

11. San Diego (3)

12. Sacramento (10)

13. Miami-Ft. Lauderdale (2)

14. Seattle (9)

15. Tampa-St. Pete (8)

16. Lakeland-Winter Haven, FL (Unranked)

17. Austin, TX (Unranked)

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18. Port St. Lucie, FL (Unranked)

19. Orlando (11)

20. Houston (Unranked)

21. Nashville (Unranked)

22. Riverside, CA (21)

23. Cleveland (Unranked)

24. San Antonio (24)

25. Philadelphia (17)

Seven cities made Biz2Credit’s “Best Small Business Cities” Top 25 that were unranked in 2020: Providence, RI; Lakeland-Winter Haven, FL; Austin, TX; Port St. Lucie, FL; Houston; Nashville; and Cleveland.

The pandemic showed many entrepreneurs – especially those who own technology companies and other firms that can operate virtually— that they did not need to be in large cities. That’s why cities like Providence, Lakeland-Winter Haven, and Port St. Lucie made the list.

Meanwhile, seven cities on Biz2Credit’s new Top 25 ranking for 2020 dropped off the list (2020 rank in parenthesis): Raleigh (15), St. Louis (18), Charlotte (19), Chicago (20), Minneapolis-St. Paul (22), Detroit (23), and Phoenix (25).

The Top 10 metro areas by Annual Revenue*

1 Fresno, CA: $821,720

2 San Francisco: $661,241

3 San Diego: $611,083

4 Port St. Lucie, FL: $608,148

5 Denver: $603,712

6 New York: $577,173

7 Boston: $558,627

8 Austin, TX: $528,877

9 Portland: $519,757

10 San Jose: $509,485

* Average annual revenue measured during 2021

Revenues were down significantly for small businesses. In last year’s study, businesses in San Jose, Miami, New York, Seattle, and San Diego averaged over $1 million in annual revenue. A year later, in 2021, no cities on the Biz2Credit ranking had average revenues above $825,000.

It seems small businesses in 2021 were dealing with COVID-related restrictions, consumer fear of going out, and the emergence of the Omicron variant, which hit late in the year, just as restaurants and entertainment venues were starting to rebound.

The metropolitan areas with the Highest Number of Small Business Loan Applications in 2021 were:

1. San Jose

2. Baltimore

3. New York

4. Boston

5. San Francisco

6. Los Angeles

7. Washington, D.C.

8. Portland

9. Providence

10. Denver

The Biz2Credit analysis also examined Age of Business (in months), an indication of startup activity. There were several newcomers in 2021, including Fresno, CA; Tulsa, OK; Columbus, OH; Lakeland-Winter Haven, FL; and Memphis, TN. The top 10 cities with the youngest Age of Business (in months) were:

1. Kansas City: 42

Omaha: 42

Denver: 42 (tie)

4. Fresno, CA: 43

Memphis: 43

Columbus, OH: 43 (tie)

Lakeland-Winter Haven, FL: 43 (tie)

Washington, D.C.: 43 (tie)

Tulsa, OK: 43 (tie)

10. Riverside, CA: 44

Pittsburgh: 44 (tie)

Seattle: 44 (tie)

Grand Rapids, MI: 44 (tie)

Baltimore: 44 (tie)

Miami: 44 (tie)

The pandemic showed many entrepreneurs – especially those who own technology-based companies — that they did not need to be in large cities. That’s why we see Midwestern cities like Kansas City, Omaha, Columbus, Pittsburgh, and Grand Rapids on the list of youngest businesses, which is a sign of new businesses launching.

When sorted by Credit Score, tech hubs, such as San Jose, New York, San Francisco, and Boston showed were among the cities with the highest FICO scores.

1. Providence: 618

2. San Jose: 617

New York: 617 (tie)

4. Boston: 614

5. San Francisco: 610

6. Los Angeles: 609

Seattle: 609 (tie)

8. Sacramento: 608

9. Portland: 607

Washington, D.C.: 607 (tie)

Average Credit Scores were down significantly in 2021. For instance, in last year’s study, top-ranked San Jose came out on top with an average score of 650, and No.10 Tampa was at 629.

This year, the city with the highest average credit score was Providence at 618, a figure that would not have cracked the top 10 in 2020.

There’s no doubt that 2021 was a tough year for countless small businesses. COVID rattled all facets of the economy, and many companies are still recovering. However, companies involved in industries, such as technology, that didn’t require face-to-face interactions faired better because of fears about the pandemic. Further, entrepreneurs opted to go to other cities in places like Florida, where the weather is nice and land is (comparatively) cheaper.

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