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A recent study shows Pennsylvania is the 12th best state to start a small business due to state incentives and loan availability.
A local financial advisor thinks part of that is the strong regional bank presence here.
Parker Marsh, financial advisor for Stonebridge Financial Group, said regional banks are more likely to lend to small businesses than larger, national banks, making the business climate attractive.
According to the study by Lendio, using the most recent data from the Bureau of Labor Statistics, Census Bureau, and Small Business Administration from 2016-2023, a record number of small businesses are opening nationally, and Pennsylvania is the No. 12 best state to start a small business.
Lendio said 10 million small businesses have opened in the last two years with annual revenue reaching $13.3 trillion, according to the Small Business Administration. However, only 48.9% will survive five years as owners battle inflation, recession fears and colossal shifts in how Americans work and live.
Gus Faucher, chief economist for PNC Financial Services, said while there is optimism among entrepreneurs, with a mild recession expected later this year, some people may hesitate to start a new venture.
However, he said many are confident they can increase prices and profits as the economy is expected to pick up by early 2024.
In its findings, Lendio said 54.3% of Pennsylvania small businesses survive five years, there are 81 incentive programs, corporate tax rates are 8.99%, companies received $6.4 million in loans per 100,000 residents, and 48,125 educated workers moved into the state.
“It seems more clients are willing to open a small business than they were five to 10 years ago,” Marsh said.
That may be because people had more savings and were making more money coming into the pandemic, so they have more capital to invest, he said.
“Through COVID, and even now, savings rates are better than when the economy bottomed out in 2007-2009, and people are ready to make investments,” Marsh said.
Faucher is a bit less optimistic, saying while the region has seen some startups, Pennsylvania has less people in the age range where they are willing to step into a new venture.
“People in their 30s and 40s tend to start businesses,” he said. “Pennsylvania is lacking in that demographic,” Faucher said.
In fact, his research shows that many people in that age range are leaving the state for employment.
People looking to start a business look at Pennsylvania because costs are lower than other states, Marsh said. He cited lower taxes and office space costs. And government programs like the State Small Business Credit Initiative are attractive.
Faucher said he gets a sense that some small business startups are born out of the pandemic when people were working from home and looking to do something else.
Marsh agreed, saying people are happy to be out of the pandemic and may be looking for something different than their traditional job.
“The pandemic made it okay to take a lower income to be one’s own boss,” he said. “Some people start a business to create a lifestyle over income.”
Since the pandemic, Faucher said he is seeing startups in the tech industry, where there is less of a trend in the retail, leisure and tourism industries.
The biggest barrier to success is the labor market, both agreed, which is a national issue.
“The employment issue is multi-faceted,” Marsh said. “There are fewer employees with Baby Boomers retiring and the lack of legal immigrants, which businesses rely on.”
And while it is easier for U.S. citizens to find jobs right now, they are demanding more pay, which cuts into a company’s bottom line, Marsh said.
“We’re hoping that this clears up in the next few years,” Marsh said.
On the positive side, Marsh said, small businesses can find funding, build relationships and build revenue, which makes the prospect attractive.