Every day we read and hear more about the deepening effect of the current financial crisis. Businesses are closing because they cannot find the credit they need to meet payroll, large companies are laying off employees, and the historic swings of the stock market are affecting families across the nation.
Missing from the daily paper are stories about the part of the economy that is working -- small businesses, the economic heroes of our communities.
In rural America, small businesses are the backbone of our economy and communities. They create new jobs, develop new industries and create opportunity and vibrant rural communities. They are the new artisan, the renewable energy entrepreneur and the family farmer. They run grocery stores, restaurants, hardware stores and small manufacturing plants. They are the men and women who protect, nurture, and rejuvenate the American Dream.
At Vaughan-Bassett Furniture
Elkin, North Carolina
Photo: Elkin, NC [2]
Small business development is a proven strategy that generates income, builds assets and supports local economies. And history points to the important role small businesses play during economic slowdowns. In 2002, during the nation's last recession and at a time of high unemployment, small businesses created nearly 1 million new jobs. Nationally, microenterprises have created more than 4.5 million jobs in the past five years.
In our rural communities, many young people are interested in starting businesses and new farming enterprises, and the entrepreneurial spirit of new immigrants in rural America is creating opportunity for their families and communities. But the lack of support holds these promising developments back.
It is time we invest in these American heroes.
The recent farm bill took a small step in the right direction by creating the new Rural Microentrepreneur Assistance Program to make grants to organizations for loans, training and technical assistance to rural small businesses.
It's a valuable resource for rural America, but woefully underfunded at just $4 million for the entire nation. That's just 1/200,000 of the $700 billion being injected into big banks to solve the nation's financial crisis. A significant investment in rural small business development is the most critical step towards renewing our rural communities and stimulating national economic growth.
Congress can build that renewal, first, by increasing funding for the Rural Entrepreneurs Program from $4 million to $25 million (still just half the amount originally proposed for the program). That investment will prompt expansion and establishment of small businesses across rural America. The state program in Nebraska on which this new federal program is modeled creates new jobs at a fraction of the cost of corporate job creation incentives.
State Mercantile in Louisville, Colorado
Photo: Rachel Smith
Additionally, Congress should provide direct support for cash-strapped rural small businesses by establishing a microenterprise investment tax credit. A 20 percent credit on up to $50,000 of investment will provide a direct cash infusion of up to $10,000, prompting small business expansion and new start ups. Because start-up businesses rarely show a profit in their initial years, making the tax credit refundable would provide additional economic stimulus in these hard times, while also spurring investment in the future success of the business.
Congress has an opportunity to act on these two policy proposals in the coming months as part of the economic stimulus package now it will consider.
There is much potential in rural small business development, and there can be no wiser investment to provide opportunity and economic growth at a time of economic slowdown than assistance to businesses that create new jobs and innovation in our rural communities.
Brian Depew is the Rural Organizing & Outreach Program Director at the Center for Rural Affairs in Lyons, Nebraska. Read more at the Blog for Rural America.