By expanding tax breaks, streamlining regulations, and boosting incentives for investment, the Big Beautiful Bill is expected to drive a surge in demand for business loans.
A new report by The Kaplan Group highlights which states offer the best opportunities for lenders. Opportunity scoring uses official government data to rank each state by its potential for profitable business lending growth. Each state’s score balances opportunity factors like market size and wages against risks such as lending saturation. It gives lenders a clear, data-driven way to compare states and target the most promising markets.
Key Takeaways
- With new tax incentives and simplified compliance, the Big Beautiful Bill is expected to increase small business loan demand by as much as 25% in top states like California and Texas
- California, New York, and the District of Columbia stand out as the top lending markets.
- 39 states are considered higher risk or lower opportunity for rapid lending growth.
How We Ranked the States
We developed a clear, data-driven scoring system that compares every state’s business lending potential. Our approach combines official data on small business activity, employment, wages, and lending volume to create a fair comparison across all 50 states. The Net Opportunity Score makes it easy to compare states side by side.
- Pinpoints where loan demand will surge, so lenders can focus on the best states.
- Helps lenders avoid riskier, less promising markets.
- Gives lenders a clear, actionable roadmap to target new markets and boost returns under new federal incentives.
Each state received a Net Opportunity Score (Opportunity minus Risk), and we grouped them into four categories:
- High Opportunity: Net Score ≥ 20
- Moderate Opportunity: 0 ≤ Net Score < 20
- Limited Opportunity: -10 ≤ Net Score < 0
- High Risk/Low Opportunity: Net Score < -10
State Rankings
Tier 1: High Opportunity States (California, New York, District of Columbia)
The top three high opportunity states—California, New York, and the District of Columbia—together account for approximately 6.5 million small businesses.
- California: $33.0B in current lending, 4.2M small businesses, mean wage $79,900.
- New York: $15.9B in lending, 2.2M small businesses, mean wage $80,630.
- District of Columbia: $1.4B in lending, 78,026 small businesses, mean wage $109,420.
Tier 2: Moderate Opportunity States
Collectively, these states represent over 13 million small businesses.
- Texas: 3.3M small businesses, $26.1B in lending, mean wage $63,660.
- Florida: 3.3M small businesses, $20.1B in lending, mean wage $62,990.
- Massachusetts: 723K small businesses, $5.1B in lending, mean wage $83,050.
- Washington: 672K small businesses, $5.4B in lending, mean wage $81,550.
- New Jersey: 979K small businesses, $8.5B in lending, mean wage $76,320.
- Maryland: 668K small businesses, $4.3B in lending, mean wage $76,130.
- Illinois: 1.3M small businesses, $11.2B in lending, mean wage $69,020.
- Colorado: 715K small businesses, $5.3B in lending, mean wage $71,960.
- Pennsylvania: 1.1M small businesses, $9.2B in lending, mean wage $63,690.
- Minnesota: 547K small businesses, $4.2B in lending, mean wage $68,880.
Tier 3: Limited Opportunity & High Risk/Low Opportunity (Most Other States)
Market Size & Lending Volume:
The remaining states cover over 17 million small businesses.
Risk Factors:
- Smaller overall market size and lending volumes.
- Lower average wages (often under $60,000).
- Higher historical loan default rates.
- Many states have experienced flat or declining small business formation in recent years.
Full Result Table
What are The Major Changes with the Big Beautiful Bill?
The Big Beautiful Bill introduces four major changes that will boost business lending:
- Businesses can write off the full cost of equipment right away.
- The Big Beautiful Bill allows for 100% bonus depreciation through 2029 This provision is projected to reduce federal tax revenue by $362.7 billion over 2025-2034, as a result of a massive increase in business equipment investment.
- States like Texas and California, with large manufacturing sectors, already lead in equipment loan volume, and are expected to see a 15-25% increase in equipment financing demand as businesses rush to take advantage of immediate write-offs.
- New incentives for research and development.
- The bill restores immediate expensing for domestic R&D costs from 2025 to 2029, representing a $141.5 billion tax benefit for businesses investing in innovation. This change will boost private sector R&D spending by 20-30% in the years following enactment.
- Lower taxes mean more cash flow for small businesses.
- The bill increases the Section 179 expensing limit to $2.5 million and permanently raises the Qualified Business Income (QBI) deduction from 20% to 23% for pass-through entities. These tax cuts will improve small business cash flow by an average of $8,400 per business per year.
- The bill streamlines compliance by simplifying reporting requirements for small businesses and delaying or repealing certain regulations (such as Section 1071 of the Dodd-Frank Act).
- This is expected to reduce compliance costs by $2.1 billion annually for small businesses, according to the CBO. Lower regulatory costs mean more businesses can afford to apply for loans and maintain the documentation needed for approval.
How Will the Big Beautiful Bill Change Lending Demand?
- Equipment Financing: Expect a 15-25% jump in demand, especially in states with significant manufacturing and construction activities
- R&D Incentives: The bill’s expanded tax benefits for research and development are expected to drive a 20-30% increase in demand for business loans that support R&D projects.
- Working Capital: Tax relief means more businesses will qualify for loans and be able to repay them.
- Lower Compliance Costs: Especially helpful in high-regulation states, making it easier for lenders to do business.
The Bottom Line
The Big Beautiful Bill is a game-changer for business lenders. With the right data and a smart, state-by-state strategy, lenders can capture a share of a business lending market valued at over $2.4 trillion, according to recent Federal Reserve data. The key is to focus on the states and sectors where the opportunity is greatest, adapt quickly, and manage risk every step of the way.
Methodology
Data Sources
Our analysis uses only official, nonpartisan government data to ensure transparency and rigor:
1. SBA (Small Business Administration)
- SBA State Profiles 2024
- Small business counts, employment, and density by state
- Lending volumes and approval patterns
- SBA 7(a) & 504 Activity Reports FY2024
- State-level loan volumes, average loan size, number of approvals
2. BLS (Bureau of Labor Statistics)
- State Employment and Wage Data 2024
- Total employment by state
- Mean and median wage levels
- Cross-industry employment statistics
3. JCT (Joint Committee on Taxation)
- Revenue Estimates and Tax Provision Scoring
- National-level fiscal impact of equipment expensing, R&D credits, and small business tax relief
4. Congress (Congressional Budget Office & Legislative Text)
- CBO Economic and Budgetary Impact Analysis
- National projections for GDP growth, lending demand, and business investment
- Bill Text and Section-by-Section Summaries
- Official legislative language and policy details
Data Preparation
- Processed 54 states/territories from SBA and BLS datasets
- Filtered BLS data to state-level, all occupations, cross-industry
- Merged datasets using state name as the key
- Final dataset includes 50 states with complete data; missing lending values treated as zero
Derived Metrics Calculation
- Small Business Density = (Small Business Count / Total Employment) × 1000
- Small Business Employee Ratio = (Small Business Employees / Total Employment) × 100
- Average Employees per Small Business = Small Business Employees / Small Business Count
- Lending per Small Business = (Total Small Lending Billions × 1B) / Small Business Count
- Wage Premium = Mean Annual Wage / Median(all state wages)
Normalization Process
- All variables normalized to a 0–1 scale using min-max normalization for equal weighting
Opportunity and Risk Score Development
- Opportunity Score (0–100):
- Market Size (40%), Business Density (20%), Wage Level (20%), Growth Potential (20%)
- Risk Score (0–100):
- Lending Saturation (40%), Economic Risk (30%), Market Risk (30%)
- Net Opportunity:
- Net Opportunity = Opportunity Score – Risk Score
State Categorization
- High Opportunity: Net Score ≥ 20
- Moderate Opportunity: 0 ≤ Net Score < 20
- Limited Opportunity: –10 ≤ Net Score < 0
- High Risk/Low Opportunity: Net Score < –10
Methodology Note for Colorado
Colorado wage and employment data uses 2023 BLS statistics due to unavailability
in the 2024 dataset. All other states use 2024 data. This temporal difference
should be considered when interpreting Colorado’s relative rankings.
