What’s happening in Miami, Florida can tell entrepreneurs a lot about the secret sauce to small business financing.
Miami may have just knocked off the world’s perennial financial powerhouse, New York City, as the top spot for small business financing in 2019.
Miami’s overall business sector growth is now number one in America according to Bizz2Credit’s annual rankings. It’s also the only other city in the top 5 not located in tech-hungry California.
The new rankings scrutinized 30,000 companies who applied for small business financing, taking into account revenue, credit score, age of business, cash flow, debt, taxes, and other data.
New York remains the top market in too many ways to list, but any firm considering small business financing would be wise to look to the Magic City for inspiration – and analysis.
Sure, Miami has some obvious advantages. There’s the weather, which means tourists, which means cash flow. The city is also benefiting from real estate and construction booms.
But Miami has also been dubbed the cultural gateway to Latin America. This means the economy is as diverse as the people.
Miami is also the actual gateway, or more accurately, waterway, for imports and exports to Latin America, according to Forbes.
Here among the pastels and neon lights is a vibrant nightlife scene, busy harbors full of enormous cruise ships, and of course, Miami is now one of the busiest international shipping centers in the United States.
But how exactly did a party town dethrone Wall Street when it comes to small business financing?
The answer is investor diversity.
While Manhattan has the big banks, with the big money, Miami has a huge contingency of smaller, but aggressive domestic and international investment firms. This means plenty of savvy alternative funding meeting demand in a complex local economy with global sprawl.
New York City is still thriving, of course. It remains the number one spot for average annual small business revenue, at nearly $1.3 million, according to Forbes. But other cities have growing small business financing opportunities that deserve note.
The top 10 cities for business growth are now:
- San Jose
- San Francisco
- New York
- San Diego
- Los Angeles
- Washington D.C.
Boston has also made a debut on this list at number seven, incentivizing new capital firms thanks to a thriving tech sector and a wicked smart workforce. Harvard anyone?
So the trend emerges: a booming local market attracts small business financing from alternative firms the big banks often miss.
As has been noted, even with a sturdy and growing US economy overall, a full two- thirds of entrepreneurs looking for capital are initially rejected.
Surprisingly, the reason is not credit scores or debt. Rather, big banks will simply pass on small business financing opportunities as borrowers too often submit partial or incomplete applications.
For tips on how to avoid this cruel fate, brush up here.
As boom towns like Miami, Boston, and yes, New York City show, when market growth meets diversity in small business financing options, economic miracles abound.