Entrepreneurs Are Heading To The Heartland: Report Ranks South Dakota No. 1 For New Business

National Business Capital finds red states dominating the top 10 with lower costs,  stronger growth, and higher survival rates.

HAUPPAUGE, N.Y., Nov. 19, 2025 /PRNewswire/ -- Great business ideas are like seeds: Where you plant them makes all the difference.  And, according to National Business Capital's second annual report, "The Best States to Start a Business 2026," red states across the Midwest and South are providing the most fertile soil for entrepreneurs this year.

This annual study from the business lending platform discovered South Dakota took the top spot, followed by Texas (2nd) and North Carolina (3rd). These states strike the right balance between growth, favorable tax conditions, and strong business survival rates - giving entrepreneurs a more predictable foundation to build on.

Politics appears to play a factor. All of the top the states are "red states." The highest ranked blue state, Washington (11th), stood out for its labor productivity and first-year business survival rates, while California (14th) remained a hub for innovation despite rising costs.

The full study is available HERE:

Key Findings

• More Startups Are Surviving: The average first-year survival rate rose to 76.8% in 2024 (up from 75.9%), though the five-year rate slipped slightly to 51.2%. This may be due to lingering effects of COVID-related business failures.
• Red States Sweep the Top 10: All top 10 states are red, averaging 53.9 out of 100 versus 45.9 for blue states using the methodology below. Red states also posted stronger Q2 2025 GDP growth (3.6% vs. 3.0%) and better five-year survival rates (51.6% vs. 50.5%).
• Lower Costs vs. Greater Capital: Red states benefit from cheaper energy (11.8¢/kWh vs. 18.6¢) and lighter taxes, while blue states lead in productivity growth (+2.8% vs. +2%) and access to capital, including SBA approvals and venture funding.
• Midwest Remains Most Balanced: With a score of 55.6, the Midwest outperformed all regions thanks to steady growth, modest taxes, and durable businesses - though startup activity remains low, suggesting untapped potential.
• Pacific States Start Fast, Fade Early: The Pacific region leads in first-year survival (78.9%) but lags in five-year success (50.6%), showing strong starts but long-term challenges.

"Starting a business is a nerve-wracking proposition," said Joe Camberato, CEO of National Business Capital. "Why not start it where you have the greatest chance for success?"

The Top 10 States To Open A Business In 2026

1. South Dakota Score (out of 100): 72.7
   Rank: 1st (+15 from last report)
   
   
2. Texas
   Score: 70.2
   Rank: 2nd (+2)
   
   
3. North Carolina
   Score: 69.7
   Rank: 3rd (+15)
   
   
4. Ohio
   Score: 69.3
   Rank:  4th (+6)
   
   
5. Indiana
   Score: 62.2
   Rank: 5th (+3)
   
   
6. North Dakota
   Score: 61.5
   Rank:  6th (+11)
   
   
7. West Virginia
   Score: 61.1
   Rank: 7th (+41)
   
   
8. Utah
   Score: 60.6
   Rank: 8th (-6)
   
   
9. Iowa
   Score:  60.0
   Rank: 9th (+24)
   
   
10. Michigan
    Score: 58.5
    Rank: 10th (-8)

The Bottom 10 States

41. Virginia (41.8 out of 100; -29):
42. Missouri (41.6; -2)
43. Vermont (40.8; +4)
44. Alaska (40.4; -14)
45. Mississippi (38.9; -21)
46. Oregon (37.9; +0)
47. Kansas (35.7; +3)
48. Alabama (34.6; -12)
49. Maryland (31.2; -11)
50. Hawaii (31.1; -27)

Metrics

• Year One Survival Rates (10%)
• Year Five Survival Rates (14%)
• GDP Change (8%)
• LLC Filing Costs (3%)
• LLC Annual Costs (5%)
• Business Tax Burden (16%)
• Business Applications Per 100,000 (8%)
• Venture Capital Per Capita (8%)
• SBA Loan Approvals Per 100,000 Residents (10%)
• Labor Productivity Change (9%)
• Commercial Electricity (9%)

About National Business Capital :

National Business Capital a pioneer of non-bank financing, provides non-asset-backed financing solutions ranging from $250K to $15MM. Since 2007, the company has financed billions of dollars while innovating how business leaders access growth capital. The team's approach to each transaction allows clients to maximize financing options.

For more information on this list and this topic, please contact Sarah Johnson.

CONTACT

Sarah Johnson
[email protected]

SOURCE National Business Capital