SBA’s Rural Activities

SBA’s Rural Activities

April 22, 2024
SBA’s Rural Activities
The U.S. Small Business Administration’s (SBA’s) mission
not participated in SBIR and STTR programs.” SBA has
is to “aid, counsel, assist, and protect” the interests of small
clarified in FAST notices of funding availability that this
businesses. While SBA generally helps small businesses
provision typically refers to rural states.
regardless of location, small businesses may constitute a
larger proportion of businesses in rural areas. According to
SBA’s Growth Accelerator Fund Competition (GAFC),
SBA’s Office of Advocacy (Advocacy), as of August 2023,
which makes grants to entities assisting small businesses
nearly 85% of establishments in rural counties nationwide
and startups working in the science, technology,
are small businesses, and small businesses in those rural
engineering, and math and research and development
counties employ roughly 54% of workers in those counties.
(R&D) fields, does not have specific statutory authority.
However, rural small businesses can face particular
However, SBA’s FY2025 budget request noted that GAFC
challenges. According to the same Advocacy study,
“identifies groups and/or geographies that traditionally have
between 2012 and 2019, rural small business employment
difficulty obtaining R&D funding and investment capital,
increased by 1%, while rural non-small business
such as rural communities.”
employment increased nearly 13%.
SBA’s FY2025 budget request identified several areas
Although many SBA programs are available to small
where SBA intends to expand its assistance to rural small
businesses in any U.S. location, some programs target rural
businesses. The budget request noted that SBA’s
small businesses. Some Members of Congress have stated
Historically Underutilized Business Zone (HUBZone)
that SBA should expand its service to rural small
contracting preference program “will continue to work with
businesses. Members of the 118th Congress have introduced
governors’ offices to expand the program’s reach to rural
several bills pertaining to SBA’s rural activities. Some of
areas across the country through a new category of
these bills focus on SBA’s Office of Rural Affairs (ORA).
HUBZones known as ‘Governor-Designated Covered
Congress authorized ORA in the Small Business
Areas.’” The budget request also stated that SBA would
Administration Reauthorization and Amendments Act of
work with the U.S. Department of Agriculture (USDA), the
1990 (P.L. 101-574), but the office appears to have been
Department of Commerce, and other federal agencies to
mostly dormant since.
“assist small businesses in rural areas to increase their
participation in exporting, government procurement,
This In Focus summarizes select SBA programs targeting
tourism, access to credit, incubators, innovation,
rural small businesses, outlines coordination between SBA
technology, and other small business programs.”
and the U.S. Department of Agriculture on rural small
business issues, discusses the history of ORA, highlights
SBA and USDA Cooperation
recently proposed legislation, and presents considerations
SBA has previously worked with USDA on issues
for Congress.
concerning rural small businesses. The two agencies signed
a memorandum of understanding (MOU) in April 2018.
Selected SBA Programs for Rural Small
The MOU stated that SBA and USDA had mutual interests
Businesses
in issues including “improving investment opportunities in
Some SBA programs may target rural small businesses.
rural areas” and “aiding rural businesses in providing tools
Some of these preferences are established in law. The
to export products around the world.” Among other
statute authorizing SBA’s State Trade Expansion Program,
activities, the MOU established that SBA and USDA may
(STEP; 15 U.S.C. § 649(l)), which makes grants to states to
work together to:
help expand the number of small business exporters and the
dollar value of those exports, says that SBA may prioritize
• provide joint trainings and technical assistance for rural
STEP applications from states proposing a program that
small business owners;
“demonstrates intent to promote trade expansion” by rural
small businesses, among other entities.
• help rural small businesses find export opportunities;
and
Similarly, the statute authorizing the Federal and State
Technology Partnership Program (FAST; 15 U.S.C. §
• expand collaboration between the USDA Rural Partners
657d), which awards grants to entities to increase Small
Network and SBA’s resource partners, which provide
Business Innovation Research (SBIR) and Small Business
management and technical assistance to small
Technology Transfer (STTR) program applications from
businesses.
certain small business owners, says that SBA “shall
consider” whether a FAST application “addresses the needs
The MOU also established interagency working groups to
of” small businesses “located in areas that have historically
examine capital access and investment in rural areas and
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SBA’s Rural Activities
how to grow businesses in rural areas. The MOU expired in
H.R. 5425 would create new provisions related to ORA.
April 2023, but SBA and USDA signed a new, nearly
The bill would establish an Assistant Administrator for
identical MOU in October 2023. As of April 2024, the
ORA; increase ORA’s outreach activities; and require SBA
working groups have not produced any publicly available
to submit an annual report on ORA’s activities to the House
reports.
and Senate small business committees.
SBA’s Office of Rural Affairs
The Small Business Administration Rural Performance
Congress authorized SBA’s ORA in the Small Business
Report Act (H.R. 5265) would require SBA to annually
Administration Reauthorization and Amendments Act of
report about ORA’s activities, including how it promotes
1990 (P.L. 101-574). ORA’s statutory purposes include:
the availability of financial assistance for rural small
businesses. H.R. 5265 would require SBA submit the report
• achieving an equitable distribution of financial
to the House and Senate small business committees and
assistance available for rural small businesses;
post it on the agency’s website. In addition, H.R. 5265
would require SBA to report on its collaboration with
• compiling annual statistics on rural areas, including
USDA as detailed in the 2018 and 2023 MOUs. The report
population, poverty, job creation and retention,
would be required to include the findings of the working
unemployment, business failures, and business startups;
groups established in the MOUs. H.R. 5265 passed the
House in February 2024 and was referred to the Senate
• providing information to industries, organizations, and
Committee on Small Business and Entrepreneurship.
state and local governments concerning the federal
assistance available to rural small businesses; and
Considerations for Congress
Congress could consider directing SBA to add a greater
• assisting rural small businesses with tourism promotion
focus on rural small businesses in some of the agency’s
and development.
existing programs. However, in some cases where SBA
programs have requirements to focus on or target rural
ORA has been largely inactive despite its statutory
small businesses, these have not necessarily resulted in
authorization. The office has not received funding in annual
increased resources to rural small businesses. For example,
appropriations bills since its authorization (Congress funds
the Community Advantage (CA) Pilot Program (a 7(a)
SBA through annual appropriations bills). In July 2019, 16
subprogram) includes rural areas as one type of market that
Members of Congress signed a letter to the acting SBA
counts towards the requirement that a CA lender make at
administrator requesting information on why ORA was
least 60% of its loans to underserved markets. But in
never fully established. SBA does not appear to have
FY2023, a lower share of CA loans went to rural businesses
publicly responded to the letter.
than did 7(a) loans processed through other methods that do
not have any incentive or requirement for rural lending.
In the 116th Congress, the committee report for the
Congress may want to further study the effectiveness of
Financial Services and General Government Appropriations
such rural requirements or incentives.
Act, 2021 (H.R. 7668) directed SBA to submit a report on
ORA, “detailing the Office’s mission, strategic plan, and
ORA appears to not have had a director for most of the time
staffing and resource requirements, including the costs and
since its authorization by Congress. SBA’s leadership
potential benefits of establishing an Associate
website does not list any staff associated with ORA. ORA’s
Administrator position for the Office.” In the 117th
lack of activity was noted in the committee report for H.R.
Congress, the committee report for the Financial Services
5425 in the 118th Congress, which stated, “The Office of
and General Government Appropriations Act, 2023 (H.R.
Rural Affairs has been historically underutilized by the
8254) stated, “The Committee is dismayed that SBA has yet
SBA, with its leading position remaining generally vacant.”
to submit the report required in H.Rept. 116-456 on the
H.R. 5425 would require SBA establish an Assistant
Office of Rural Affairs, and expects SBA to expeditiously
Administrator position in charge of ORA. Congress could
submit this long-overdue report.” As of April 2024, the
also require that position, or a different position with
report is not publicly available.
responsibility for ORA, to not only be created, but to be
filled.
Recent Legislative Activity
Members of the 118th Congress have proposed multiple
Rather than keeping ORA as a standalone office within
bills concerning SBA’s rural activities. The Investing in
SBA with its own leadership, Congress could also decide to
Rural Manufacturing Act (H.R. 414) would amend SBA’s
fold ORA into one of SBA’s existing departments. Options
7(a) program to establish a program of rural manufacturing
for this could include SBA’s Office of Capital Access or
loans. The loans would be allowed to be used for certain
Office of Entrepreneurial Development, although those
costs to businesses that manufacture goods essential to
offices tend to operate their own programs. Based on
critical infrastructure sectors in rural areas. Loan applicants
ORA’s statutory language, managing programs may not be
would be required to submit a business plan including a
the purpose of the office as much as it is SBA-wide
goal for the number of jobs that would be created or
coordination. Another option may therefore be to place
expanded with the loan funds. Businesses that meet at least
ORA within SBA’s Office of the Administrator.
75% of their job creation goals would be eligible for loan
forgiveness.
Adam G. Levin, Analyst in Economic Development Policy
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SBA’s Rural Activities

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