“Reversing the Decline in Entrepreneurship” (July 19 Hearing): QFRs on lmproving Entrepreneurship in Rural Areas

By at 28 August, 2017, 6:26 pm

The Honorable Steve Chabot


Committee on Small Business

United States House of Representatives

Washington, D.C.  20515


Dear Chairman Chabot:

Thank you for the opportunity to provide testimony at the July 19, 2017 hearing, “Reversing the Entrepreneurship Decline.” I enjoyed the discussion among all committee members and I am pleased there is bipartisan enthusiasm for boosting entrepreneurship across America.

Below, please find my response to the following question asked by Representative Radewagen:  “As you mentioned in your testimony, access to adequate broadband in rural areas would be a huge benefit to rural small businesses and rural communities. What other solutions would you suggest to improve entrepreneurship in rural areas?”


Access to Broadband: Access to broadband is one of the most pressing solutions for bringing opportunity and the tools of the modern economy to rural America.  Broadband would allow individuals to access the education, markets, networks, digital tools and capital that are all necessary for launching a small business, and competing in the marketplace. Efforts by the Federal Communications Commission (FCC) to streamline rules and modernize regulations will help our nation’s smaller ISPs to deploy their capital to build networks (and higher quality broadband), which is a very positive development for rural communities.  In addition, changes to FCC rules that would allow the technology community to use “TV white spaces” to deploy broadband in rural areas would get broadband more quickly to these areas.  Given the fact that FCC Chairman Ajit Pai has made closing the digital divide the main priority for the commission, with this goal being followed up by aggressive action, I am hopeful that broadband deployment will accelerate in 2018.  A policy environment that encourages investment will also allow that to happen, and thankfully we are seeing that on the tax and regulatory front at the federal level.

Access to Capital: Rural America was hit hard by the Great Recession and financial crises and there has been little or no recovery in many areas of rural America.  The flight of capital and human capital, combined with the influx of opioids, and the lack of modern tools (like broadband) have compounded the problem.  When an ecosystem has no capital to fuel opportunity and economic development, there is little hope for these communities.  A combination of solutions is needed to redirect capital to these rural communities.

First, regulators and the Congress must address the regulatory issues around community banks and move quickly to relieve them of unnecessary and costly red tape.  This would help to “stop the bleeding” of small-bank closures and perhaps encourage entrepreneurs to start new banks that have both an online and community presence.

Second, we can harness the power of regulation crowdfunding by making smart rule changes (imposed by the Securities and Exchange Commission) that are barriers to small businesses and entrepreneurs utilizing crowdfunding platforms to raise capital.  We are already seeing very positive results from “Title III” crowdfunding, which was meant to help small businesses raise capital.  It took four long years for the SEC to write the rules for Title III, which is why we are only now beginning to see promising results.  Specific reforms – like raising the $1 million cap, reducing red tape and paperwork associated with filing for a raise (and compliance), allowing startups to “test the waters,” along with other reforms  – would truly democratize access to capital through crowdfunding and unleash this new form of fund raising. I would be more than happy to share the list of reforms with you or committee members.

Third, SBE Council supports “opportunity zones” to incentive long-term private investment in distressed communities across America. The bipartisan “Investment in Opportunity Act” (H.R. 828/S. 293) is a promising piece of legislation that would use “low income community” census tracks to define areas eligible to be an opportunity zone. Governors would have a hand in selection of these areas as well.  Investors would be given a modest reduction on capital gains for their original investment after holding qualified investments for five to seven years.

Education and Training: The resources provided by federal, state and local governments need to be reviewed and better coordinated to meet the needs of rural America. A massive amount of tax dollars is going into programs where there is overlap or redundancy, and now is a good time to review federal programs to determine whether a shift needs to occur in these programs to better meet the needs of rural Americans.  The Small Business Administration (SBA), U.S. Department of Commerce and other agencies need to think more innovatively in how they are providing their programs.  For example, entrepreneurs and small businesses are meeting the needs of customers and testing new markets by opening “pop up stores” and mobile store-fronts. Why can’t federal training programs utilize the same approach?  Regarding online training, once these communities have access to broadband, individuals will have access to a world of training resources. The SBA is currently working hard to get the word out about their services, and this effort must continue.

Thank you for the opportunity to provide additional recommendations.  Please feel free to contact me if you have questions, or need additional information.


Karen Kerrigan, President & CEO


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