RALEIGH — As a state recognized for its economic prowess by local, national, and even international media, it’s easy to forget that much of North Carolina’s economy is powered by small businesses. And while small businesses remain the mainstay of the state’s economy, many rural entrepreneurs and the small businesses they operate continue to struggle.
The NC Rural Center and Thread Capital recently conducted research on the health of rural small businesses and now have produced a video telling the story of this harsh reality for rural entrepreneurs in North Carolina. Focused on the 2005 to 2015 time period, the results were problematic even during a period of economic expansion. As our current economic recovery softens, the ongoing challenges facing rural small businesses should be expected to accelerate. While any economic downturn will impact everyone, history tells us that it will disproportionately affect rural communities.
When comparing the state’s diverse and geographically large rural community to that of its six core urban counties, even a period of expansion tells a story of two very different North Carolinas:
- Between 2005 and 2015, North Carolina had a seven percent decline in small rural business establishments, a loss of 4,289 very small businesses in rural North Carolina.
- In the same period, the state’s six core urban counties gained 5,534 small businesses, a nine percent increase.
The reasons for this are complex in both reach and cause. Yet one significant driver for business formation or growth, consistently across both economic sectors and geography, is access to capital. However, in the state’s rural areas, 165 brick-and-mortar banks have closed since the end of the Great Recession, accounting for 65 percent of statewide closures.
Meanwhile, many rural small businesses are having a hard time accessing the capital they need to prosper and grow. Since the end of the Great Recession, while suburban lending was stable, urban lending continually increased, and rural lending declined.
Between 2005 and 2015, rural counties experienced a 61 percent decline in small business lending, for a total decline of more than $1.6 billion.
“It is our hope that our research report raises awareness and starts a broad coalition of public and private partners on a path to addressing and securing North Carolina’s economic future,” said Thread Capital Executive Director Jonathan Brereton.
In 2018, as a response to the troubling decline in small business lending across the state, the NC Rural Center launched Thread Capital as a standalone lending subsidiary to better support North Carolina’s entrepreneurs and small business owners. Last week, both the Rural Center and Thread Capital announced a new collaboration with the Kansas City-based Ewing Marion Kauffman Foundation to further support entrepreneurship in the state.
Kauffman Foundation’s “Start Us Up Coalition” is a collaboration of 100 entrepreneurship advocacy groups nationwide working to promote state-level policy initiatives to support emerging entrepreneurs and small-business owners. The launch of the coalition coincides with the release of the Foundation’s new policy report called America’s New Business Plan, which will provide policymakers at all levels a bipartisan roadmap for reducing barriers to entrepreneurship and spurring more startups across the country.
“The economic engines of our largest urban counties might drive our state’s economy, but it is the rural small business owner who sustains our local communities,” said NC Rural Center President Patrick Woodie. “North Carolina must work across economic sectors and geography to address the growing disparity of capital access between our rural and urban counties.”
