WASHINGTON, D.C.–U.S. Senator Martin Heinrich (D-N.M.), Ranking Member of the Joint Economic Committee, delivered the following statement at today’s hearing entitled “The Innovation Economy, Entrepreneurship, and Barriers to Capital Access.” In his remarks, Senator Heinrich highlighted the recent Joint Economic Committee Democrats report, “Investing in Rural America,” that emphasizes that tribal and rural communities often struggle to reach mainstream financial institutions, and need federal resources to successfully secure capital and technical assistance.
Below are his remarks as prepared for delivery:
“Mr. Chairman, thank you for focusing on barriers to capital access. It’s an important issue and I look forward to the insights of our witnesses.
We have talked before about the important role small and new firms play in driving innovation and creating jobs.
Yet, the start-up rate has been declining for years, and new businesses increasingly are concentrated in the large urban counties, while rural communities are struggling to keep up.
A big challenge for entrepreneurs in small towns and remote areas is getting access to capital to turn their idea into a business or to take their business to the next level.
JEC Democrats recently released a comprehensive report – Investing in Rural America – that examines the economic challenges and opportunities facing rural communities.
Two challenges jumped out.
First, insufficient access to broadband leaves communities disconnected from economic opportunities and unable to reach customers around the globe.
And, second, insufficient access to capital constrains growth.
The more rural you get, the less access to capital there is.
Many rural communities have seen their financial institutions disappear and with them access to loans people need to build and expand businesses.
In New Mexico, there are just a handful of cities with 50,000 people or more. Often, small towns are less able to access grants and other federal resources that may be available to them.
And smaller communities have fewer financial institutions – whether they be banks, credit unions, community development financial institutions, or nonprofits.
Let’s take banks.
From 2008 through 2016, 86 new banking deserts—areas where no banks exist within 10 miles—were created in rural communities.
We need to reverse this trend.
Expanding access to capital must go hand in hand with building the know-how and expertise to launch and grow businesses.
In my state, nonprofits like WESST help budding entrepreneurs create their business plans, access micro loans, and build their businesses. More than two-thirds of those they serve are women. And an even larger share are low-income.
SBA’s Women’s Business Center helps fund WESST. But SBA and USDA don’t have the staff needed to go out and build awareness of the many programs they operate that could support rural businesses.
We need more boots on the ground.
There are also a growing number of resources available online.
Online services allow consumers to continue to have relationships with financial institutions that no longer have a physical presence in a community.
But the reality is for this to be a viable option for rural and tribal communities, these communities need to be connected to broadband, and too often, that’s not the case.
It’s not just a shortage of banking options.
Venture capital is also scarce in rural areas. More than three quarters of venture capital goes to companies in New York, Boston, San Francisco and Los Angeles.
There are entrepreneurs across this country with good ideas and smart business plans. But they need access to investors who can help transform these ideas into growing businesses.
The federal government has a vital role to play.
We need to support small business lending through proven programs at the SBA, USDA, and the CDFI Fund.
We also need to build the technical expertise to help people access federal resources while also promoting increased awareness about the programs that exist at SBA, USDA and Treasury.
That’s what an organization called Grow New Mexico is doing. They connect people, businesses and communities to resources that can help.
Unfortunately, the Trump administration seems to be heading in the opposite direction.
Instead of doing more to increase access to capital, the administration proposed zeroing out the CDFI Fund’s grant making.
The White House’s rescission package also targeted several USDA programs that support rural communities, a sign that the administration is failing to get money out the door.
And the recent Republican tax law actually makes the tax code more complex for small firms.
We need to realign priorities.
Expanding access to capital means providing more and better options – and ensuring that people and communities are able to utilize those options.
I look forward to hearing from our witnesses on how we can build an innovation economy that supports innovation and growth in all parts of the country.”
For more information, please contact Latoya Veal at Latoya_Veal@jec.senate.gov or 202-224-0379.