Long before the COVID-19 pandemic ravaged small businesses across the country, rural Main Streets were struggling. Rural populations have declined as small farms closed or consolidated; manufacturers moved overseas; and mining, timber, and other extractive industries dried up. Around rural town centers, new extractive industries moved in: dollar stores, superstores, and national chains offering low prices to undercut local downtown businesses and putting even more of them out of business. 52 percent of a dollar spent at locally owned businesses recirculates in the region and builds the tax base, while profits from chain stores flow out to corporate headquarters, with only 16 percent of revenue staying in the local community. Supporting workforce training and business services in “distressed” communities helps to grow small businesses and an entrepreneurial ecosystem of independently owned local businesses.
Support Small Business and Rural Main Street
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State policymakers can support rural Main Streets in a variety of ways. Enacting a state version of the federal Startup Opportunity Accelerator Act would support rural entrepreneurs and build entrepreneurial ecosystems through investment in startup accelerators and incubators in rural, low-income, and other underserved communities. There are also opportunities for business development paired with strategies to address other community needs, such as lack of affordable healthy food.
Policy Priorities
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Federal: Pass the Rebuild Rural America Act, a bill that would expand rural economic development and job creations. The bill establishes a $50 billion grant fund, creates federal training and technical support, establishes a state-by-state rural innovation and partnership administration to coordinate efforts, and creates a Rural Future Corps to support essential development.
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Federal: Overhaul the U.S. Small Business Administration (SBA) to better support new and growing businesses, especially those in rural areas, the very small, and those owned by women and people of color. This means shifting a significant share of the SBA’s loan programs to finance independent entrepreneurs in communities that have been left behind and rethinking SBA’s training programs to better serve rural and minority entrepreneurs. SBA’s Office of Advocacy should also be transformed to provide analysis and advocacy on the most pressing policy issues hindering independent businesses, including unchecked monopoly power and policies that spur corporate consolidation.
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Federal: Reform federal procurement and contracting. Procurement should not only include “Buy American,” but also “Buy local,” “Buy rural,” and “Buy from independent small business” initiatives that channel the procurement power of government spending to create rural opportunities. In addition, “stewardship contracting’’ should be mandatory where possible to promote local business and economic development.
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State: Pass legislation similar to the Startup Opportunity Accelerator Act.
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State: Address access to healthy foods by boosting small businesses.
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State: Provide affordable access to capital to the smallest businesses, even those with lower credit scores, through allocating more funding to Community Development Financial Institutions.
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State: Pass truth in lending laws to regulate online small business lending and discourage predatory lending practices, particularly toward entrepreneurs of color and women.
State Examples
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New Jersey (2020 NJ AB 2595) legislators are considering a bill that would authorize political subdivisions to require recipients of economic development incentives to enter into community benefits agreements that support local small businesses.
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Texas (2021 TX HB 4054) lawmakers introduced a bill that would establish a community development grocery store grant program to provide grants to businesses proposing to operate a grocery store in a food desert. To be eligible for grant funds, businesses would be required to provide health insurance benefits and a prevailing wage to workers.
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Legislators in Missouri (2021 MO SB 188) introduced a bill that would establish a tax credit for expenses incurred in establishing a grocery store in a food desert.
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In California (2018 CA SB 1235), legislators enacted a bill that would protect small businesses against predatory lending practices by creating new loan disclosure requirements for commercial loans, including nonbank and online lenders. New York (2020 NY S 5470/A 10118) lawmakers passed similar legislation to establish disclosure requirements for commercial loans provided by traditional and nontraditional lenders, including online lenders, and to establish financial penalties for violations of the new law.