group by and loop

Something like you have described should be possible to do with single select with jois to the lookup tables. No cursors or other kind of processing in loops is necessary.

A select similar to the one below should solve your problem:

WITH Data AS (
    SELECT
        T.[Code],
        T.[Company],
        T.[City],
        T.[Zip],
        T.[County],
        T.[State],
        T.[Type],
        CASE
            WHEN CZ.ZIP IS NOT NULL THEN 1
            WHEN C.City IS NOT NULL THEN 2
            WHEN T.[Type] = 1 THEN 3
            ELSE 4
        END AS LocateResult,
        ROW_NUMBER() OVER(PARTITION BY T.[Code], T.[Company] ORDER BY 
                            CASE
                                WHEN CZ.ZIP IS NOT NULL THEN 1
                                WHEN C.City IS NOT NULL THEN 2
                                WHEN T.[Type] = 1 THEN 3
                                ELSE 4
                            END 
                        ) AS GroupOrder
    FROM [YourTable] T
    LEFT JOIN [ZipCodeTable] ZC ON T.Zip = ZC.Zip
    LEFT JOIN [CityTable] C ON T.City = C.City
),
SELECT
    *
FROM Data
WHERE GroupOrder = 1 AND LocateResult <> 4

It joins the lookup tables using left join.. If the ZIP code is found, then it assigns the LocateResult = 1 the highest one. If ZIP is not found, but the City was found than it assigns 2. In case non of those two is found, then in case the Type = 1 it assigns 3 and in all other cases it assigns 4.

Finally it uses the ROW_NUMBER() which is partitioned per [Code] and [Company] and inside that group the records are numbered by the Locate Results.

Final condition takes only the first record from each group, the GroupOrder is orderred according your business rules, it takes the first oen which meets your condition.

Eventually if you want a row, even there is no business rule met, then simply remove the AND LocateResult<>4. It will take one of the rows which do not meet the business rules if there is no record which meets those rules. (In that case you can remove the LocateReult from the CTE and keep only the GroupOrder.

I don't think you need a cursor for this type of query - cursors are only needed if you want to apply logic to each row one at a time (and even then there are often set based ways of achieving what initially looks like something that has to be done row by row!).

From what I understand in this instance you want to apply the same rules to all records - so I would normally do this in a series of queries - one query for each business rule. I would select the output of each query into a temp table that is used as the input to the next query. Each query will limit the results based on the required logic until you have the final results with all rules applied.

You could probably also do this as you suggest with an IsValid flag. Again I would write one query for each rule, but rather than selecting the results into a temp table you would update the flag in the table instead.