New Appalachian Regional Commission Report Highlights Challenges, Offers Solutions to Help Region Pursue Billions in Untapped Growth
WASHINGTON, D.C., April 23, 2024—In a new report issued today by the Appalachian Regional Commission (ARC), small businesses are credited with driving economic and cultural vitality across the Appalachian Region.
However, the report also points to the significant barriers that exist for these businesses to access needed capital and credit, impeding their success and, in some cases, their survival. Access to Capital and Credit for Entrepreneurs and Small Businesses Across Appalachia proposes solutions to reduce these barriers and improve capital flow to businesses.
Developed in collaboration with Next Street, the report concludes that the Appalachian Region has the potential to leverage the resilience and entrepreneurial spirit of small businesses, which in 2020 made up 99% of all businesses in the region. However, this potential is hindered by a gap between capital supply and demand, geographic constraints, and limited and inconsistent information. To unlock the full economic and cultural vitality of the region’s small business economy, the report urges that stakeholders come together and take strategic action.
“I’m encouraged by the progress Appalachian entrepreneurs have made in recent years when it comes to opening and sustaining new businesses across the region,” said ARC Federal Co-Chair Gayle Manchin. “However, for small businesses to continue to grow and strengthen the local economy, it is imperative that we better understand and address the unique challenges faced by our Appalachian business owners and take action to meet those challenges head-on.”
Key Study Findings
The study illustrates a number of economic challenges and opportunities that small businesses face in Appalachia. These findings include:
- In 2021, Appalachia experienced its highest level of new business growth in the past decade. Particular gains were made in establishing new manufacturing and construction businesses.
- In 2020, 77% of Appalachia’s 2.4 million small businesses were non-employer firms, while 16.5% were microbusinesses (fewer than 10 paid employees).
- Unmet capital demand represents a $70 billion growth opportunity in Appalachia.
- Banks provided 97 percent of the total dollars lent to Appalachian small businesses from 2017-2021. However, consolidation and branch closures are inhibiting local access.
- The most prevalent loan sizes are not always meeting the needs of Appalachian small businesses. What’s more, some loans may require an extensive revenue history, which not all small businesses in the region – especially those that are new – can document.
- Increasing the ability of regional and community lenders to access capital is critically important. These organizations are more able to meet the unique loan needs of Appalachian small businesses, which are sometimes less resourced than traditional loan applicants.
- Encouraging and designing coordinated programs for investors, developers and entrepreneurs to address emerging industries’ challenges can mobilize marketplaces throughout Appalachia and spur innovation.
The report’s findings were made possible through the analysis of a large number of publicly available datasets, including those from U.S. Census Bureau and Federal Reserve System. Additionally, the research team had in-depth conversations with more than 25 organizations working throughout the region, which provided local perspective and on-the-ground insights. Nineteen of those organizations have used, or are currently using, ARC funding to address the aforementioned gaps in capital access.
About the Appalachian Regional Commission
The Appalachian Regional Commission is an economic development entity of the federal government and 13 state governments focusing on 423 counties across the Appalachian Region. ARC’s mission is to innovate, partner, and invest to build community capacity and strengthen economic growth in Appalachia to help the Region achieve socioeconomic parity with the nation.