How Rural Small Businesses Stand Up To Unique Challenges

Small business owners across the U.S. encounter many of the same challenges while running their companies, but in rural areas, businesses are also dealing with unique problems.

Small businesses play essential roles in their rural communities and economies. The SBA Office of Advocacy reports small business owners make up more than 84.8 percent of the establishments in their rural county and employ 54.3 percent of workers.

Here are a few examples of the types of challenges that can threaten the startup, growth, and success of rural small businesses and some advice on how to overcome them.

Access to Entrepreneurial Ecosystems

Rural entrepreneurs can also face limited access to business resources and support that are available to big-city entrepreneurs, such as programs, communities, and networks designed to help start and grow businesses.

"Many rural areas lack the professional and networking opportunities that are readily available in urban areas, which can make it difficult for small business owners to gain the knowledge and connections they need to succeed," Kauffman Foundation article by RuralRise co-founder Ina Metzer.

It's important for rural entrepreneurs to find more opportunities for this type of support and discussions with other small business owners, such as university outreach programs and Chambers of Commerce groups and events. 

Look for communities that focus on rural entrepreneurs and business owners. For example, the Rural Ideas Network and USDA's Rural Business-Cooperative Service can provide various resources, including capital, training, education, and entrepreneurial skills, to help those living in rural areas start and grow businesses. 

Rural communities are also included in the SBA's HUBZone program, which offers improved access to federal contract opportunities to rural communities.

Having a network of other entrepreneurs and small business owners can be invaluable. 

"If there's no alliance in your rural community, help form one. It will benefit you and help other business owners and the community as a whole," the USDA notes.

Labor Shortage

Another challenge for small business owners is labor shortage, which hampers their ability to hire qualified workers for job openings and additional staffing.

Though the availability of labor can affect big-city businesses, statistics indicate that the shortage is more often experienced in rural area-based companies. For example, the Association of Equipment Manufacturers (AEM) reports that one out of every four businesses located outside a metro area has difficulty finding qualified workers, whereas in metro areas, one out of six businesses report difficulties. 

One contributing factor to labor issues for rural small businesses in the U.S. is a shrinking labor pool due to the declining population in their business areas.

Staffing experts in rural areas recommend that small business owners get involved in their communities more to attract potential job candidates. Making yourself and your business known to local residents can help get referrals, boost your reputation in the community, and lead to more people wanting to work at your business.

"Reputation matters in close-knit rural areas. People want to feel that companies are part of the local community," says a post by staffing firm PeopleReady.

"It's important to get involved in your area, such as sponsoring charity events or participating in local sports or school programs. Your potential candidates will see that you're willing to invest in the community, which builds trust."

For more ideas on finding qualified employees in rural areas, see our blog article, Small Towns and the Labor Crunch. 

Limited Access to Capital

Like other "underserved populations," small businesses in rural areas don't have access to the same capital opportunities that others, particularly metro-area companies, have.

Government, nonprofit, and private organizations have responded to this documented lack of funding access, leading to more discussion and programs aimed at leveling the field for rural small business owners.

Among them is the USDA, which has several initiatives focused on addressing the discrepancy on behalf of rural small businesses. The USDA made a $981 million investment in partnerships designed to create new and better market opportunities in rural areas, in part through increased access to capital. 

According to the agency website, USDA's small business funding programs offer affordable financing and technical assistance, supporting individuals who want to start businesses in rural areas and small business owners seeking to grow.

"It opens the door to new economic opportunities for communities and people who historically have lacked access to critical resources and financing."

The USDA's Rural Cooperative Development Grant program is another resource for entrepreneurs wanting to start a business and business owners looking to expand or improve rural cooperatives and other mutually-owned businesses through Cooperative Development Centers. 

The USDA also issues the Rural Business Investment Company (RBIC) license, which is issued to newly formed developmental capital organizations to help meet the equity capital investment needs in rural communities.