SBA extends rural outreach program under 2017 tax bill

The U.S. Small Business Administration is strengthening its outreach efforts to business owners and entrepreneurs in Alaska.

Last week, representatives from the SBA visited three communities on the Kenai Peninsula as part of the agency’s Rural Strong Initiative. The events were intended to connect existing businesses and interested entrepreneurs to the various services the agency provides in an effort to boost local rural economies.

The initiative began as a regional program in the wake of the 2017 Tax Cuts and Job Act and spread to a national one this year, educating entrepreneurs about SBA services and offering fee relief for SBA-backed 7(a) loans up to $150,000 for rural counties.

Rural communities often lose population because there aren’t as many economic opportunities for young people, and they leave for more urban areas. Strengthening the business climate in small towns may help keep people there, said Jeremy Field, the regional administrator for the SBA’s Pacific Northwest division.

“The SBA is considered one of the best-kept secrets of the federal government,” he said. “The best part is that it’s free.”

Businesses in rural areas face different challenges than urban ones do. While they may have less competition, there’s also fewer potential customers locally, less capital available and limitations on infrastructure like broadband internet. However, when it is available, businesses can expand their customer base to reach a variety of new customers without having to move to a central location.

The federal government considers the entirety of Alaska outside Anchorage to be rural, but there are scales within the state. While the Kenai Peninsula communities are rural compared to many regions of the Lower 48, they are still far more developed than the villages and communities off the road system in other areas of Alaska.

The most limiting factor in the most rural locations in Alaska is broadband availability, Field said. But even that is changing — the federal government is providing funding for private telecommunications providers to specifically expand into unserved and underserved areas to provide internet service.

“(Not having internet today) is almost like not having a telephone in your community in the 1950s,” Field said.

In addition to counseling services, the SBA acts as a backer for loans if a business owner has gone through advising. Field said those loan amounts can range from a few thousand dollars to more than a million, and a financial institution is more likely to offer a loan with assurance from the SBA.

As they’ve gone into rural communities, one industry has jumped out as an opportunity: tourism. While it’s not an unfamiliar sector to much of Alaska, some rural areas have little infrastructure to support tourists and little familiarity with marketing.

Since Alaska’s economy began to contract in 2014, the tourism industry has remained a growth area, particularly in communities with access to cruise ship ports. The number of cruise ship visitors in 2019 broke the state records; in 2020, cruise ship passenger visitation is expected to rise again.

The Rural Strong Initiative also highlights export opportunities for small businesses. Alaska already has a long history of exporting materials both domestically and internationally, particularly in the seafood and mining industries. However, even smaller businesses are able to engage more in export opportunities, he said.

Federal contracting is another opportunity area for rural areas. A percentage of all the federal government’s contracting has to go to small businesses through the 8(a) program, which gives small businesses a leg-up to compete with the larger corporations. It’s complicated and requires a lot of paperwork to account for the contract monies, which makes it a labor-intensive way to do business, Field said, but it can be a good way to get off the ground.

Many of Alaska’s communities have an SBA office; Homer, Kenai, Anchorage and Wasilla all have their own offices. But if the local business counselor doesn’t have the specific expertise, he or she can connect clients to the right agency or expert to help them. In the case of farming, a local business counselor could help connect an aspiring farmer to the right U.S. Department of Agriculture agent, Field said.

“If we don’t have a service that will help you, we’ll find you someone that does,” he said.

The SBA also has specific advising programs, including a center for women-owned businesses and veteran-owned businesses, and a mentorship program for retired business owners to advise incoming entrepreneurs, Field said.

The one industry they can’t offer any help on, though, is cannabis. Though the industry is legal in Alaska and still growing, cannabis is still a federally illegal substance and thus not eligible for federal assistance or traditional lines of business loans. That may change in the future if the federal government changes its position on cannabis, but for now, the SBA can’t help cannabis entrepreneurs, Field said.

Even though Alaska is still coming out of a recession — oil prices are still far less than what they were five years ago and the unemployment rate is still the highest in the country — entrepreneurs can still take the opportunity to get off the ground. The SBA has historically given more loans in times of economic downturn, Field said, in part because of the attractiveness of the federal government backing the loans.

“They feel alone — they don’t know all the things they need to be successful because nobody does,” he said.

Elizabeth Earl can be reached at [email protected].

09/25/2019 - 9:09am