Closing the Capital Gap in Rural America Is Possible

COMMENTARY

One of the biggest barriers to economic growth across our country is that parts of America are overlooked economically — simply out of sight and out of mind.

Coastal hubs attract billions of dollars in investment, while rural communities are often flown over or driven past, despite their competitive advantages, like lower operating costs, ample space, a dedicated workforce and a great quality of life.

Congress and President Donald Trump have an opportunity to close the capital gap with the Investing in All of America Act. 

Currently, five metro areas — San Francisco, New York City, Boston, San Jose and Los Angeles — collectively account for more than two-thirds of all venture capital and private equity investment nationwide, while less than 1% of venture capital goes to rural businesses and startups.

That capital gap leaves Main Street entrepreneurs struggling to hire, grow or even get off the ground. As a result, communities struggle.

We can and should do better in expanding opportunity to all of America.

That is where the Investing in All of America Act comes in. This bipartisan legislation, introduced by Reps. Dan Meuser, R-Pa., and Hillary Scholten, D-Mich., in the House, and Sens. Roger Marshall, R-Kan., and John Hickenlooper, D-Colo., in the Senate, doubles down on one of the most successful, effective tools the federal government has available to drive more capital to areas that need it most: the Small Business Investment Company program.

SBICs are private funds licensed and regulated by the Small Business Administration that invest exclusively in American small businesses. 

The private sector leads in finding small business opportunities and the SBA follows. With the SBA amplifying private investment, a powerful public-private engine for growth is fueled. These investments create hundreds of jobs as these small businesses grow.

This is a proven America First strategy: 100% American capital invested in 100% American businesses. And it works.

At a recent Senate Small Business Committee hearing, Ben Geis, board chair of the Small Business Investor Alliance, testified that, in Missouri alone, his SBIC, Eagle Private Capital, has invested in 16 companies resulting in 20% job growth. One of those companies, a manufacturer and assembler of data cables and interconnect devices, added 105 rural jobs in Jackson, Missouri. “Those numbers represent more than capital deployed; they represent real growth in real communities,” he added.  

John Mickelson, co-founder and managing partner of Midwest Growth Partners, told the committee that employment at companies that have received investment from his organization has grown from just seven employees in 2014 to more than 3,000 today. One of those companies is Shells by Design, a manufacturer of innovative tart shells and desserts, in Garner, Iowa. In addition to adding jobs, the company was able to make facility improvements and incorporate automation equipment into its manufacturing processes.  

While these may not be the types of businesses that come to mind when most people think of private equity, they are the kinds of companies that have the potential to expand, create good-paying jobs and drive long-term prosperity. When it comes to small business investing, the only way to be successful is to help small businesses grow.

The Investing in All of America Act would strengthen the SBIC program even further by removing limits for investments in rural or low-income areas, domestic manufacturing, and key national security industries. Dollars invested in these areas would not count against SBICs’ leverage cap, incentivizing critical investment without introducing new spending, costs to taxpayers or regulatory burdens. This does not force bad investments but encourages investors to seek opportunities in the parts of America that have been forgotten or passed over.

SBICs already represent over $50 billion in small business investments and have the capacity to deploy $20 billion more in the next 12-18 months.

That’s capital ready to fuel the next generation of American job creators, manufacturers and innovators. Iconic companies like FedEx and Intel were backed by SBICs early on.

These firms didn’t just grow; they transformed entire industries.

Trump has long championed rural America. Now, with Administrator Kelly Loeffler at the helm of the Small Business Administration, that vision is being put into action.

The Investing in All of America Act will help advance the Trump administration’s mission to strengthen American manufacturing and small businesses and support our economy with the same force that foreign governments deploy to support their domestic industries competing against us. This legislation passed the House with unanimous support in the last Congress.

The House and Senate should move quickly to get it to the president’s desk. 

Brett Palmer is the president of the Small Business Investor Alliance, the association of senior investment professionals focused on the lower-middle market, the members of which represent the entire private capital ecosystem. He can be found on LinkedIn.