Rural America’s Struggle to Access Private Capital

This report is made possible by the sponsorship of the Robert Wood Johnson Foundation

Rural entrepreneurship is a powerful driver of economic development, providing pathways for wealth-building, job creation, and community resilience, especially in remote and lagging regions. Rural residents are more likely to start businesses than their urban counterparts and tend to earn higher incomes than other rural workers. However, business closures and declining startup rates, driven in part by lower access to financial capital, have widened the rural-urban economic divide. Addressing financial barriers is critical to reversing these trends and fostering economic growth and diversification in rural communities.

Personal savings remain the most common source of startup capital, especially for rural entrepreneurs. Yet, rural areas have lower median household incomes and home values, limiting personal wealth as a financing tool. Traditional small business loans from banks are important for stable, incremental growth, especially for businesses in the tradable goods (e.g., manufacturing, agriculture) and local goods and services sectors (e.g., retail, healthcare, hospitality). However, rural bank consolidations have reduced access to relationship-based lending typical of the small community banks in rural areas, further restricting business formation. Continuing a trend that began in the mid-1980s, the number of rural community banks declined from 5,029 in 1994 to 2,618 in 2024 – a decrease of nearly 48 percent. These financial barriers are even more pronounced in rural areas with higher minority populations, where lower household wealth and limited access to community banks make personal savings and traditional bank loans less accessible, further constraining business formation and economic mobility.

For scalable, high-growth startups, especially in the tradable services sector (e.g., SaaS, consulting, IT services, digital marketing), venture capital is especially crucial, but remains highly concentrated in urban hubs as venture capital firms favor local, established networks. This exclusionary investment pattern exacerbates geographic disparities, even more so for rural women and minority entrepreneurs, and limits the potential for rural innovation hubs. Despite making up 12% of all U.S. businesses, rural businesses receive less than 1% of venture capital funding. This funding gap excludes rural entrepreneurs from critical investment networks, limits their ability to scale, and prevents venture capital investors from accessing innovative ideas emerging from rural communities.

Federal business loan, grant, and venture capital programs (SBA, SBIR/STTR, SSBCI, etc.) have widened rather than closed the rural-nonrural financial gap and the majority of state government place-based business programs disproportionately benefit large corporations in urban areas at the expense of small businesses and entrepreneurship, especially in rural areas.

To close the rural financial capital gap and unlock rural entrepreneurial potential, policymakers and investors must take targeted action:

• Strengthen and expand rural community banks to support relationship-based lending for local businesses, as the purely quantitative credit decisions employed by large, centralized banks often exclude rural small business borrowers.
• Increase access to venture capital in rural areas through targeted regional investment funds, angel networks, and public-private financing partnerships in rural areas.
• Better align or expand government financing programs to prioritize rural entrepreneurs, similar to the USDA Rural Business Investment Program’s focus on rural areas.

By treating rural America as an emerging market, diversifying investment portfolios, and leveraging both private and public capital, we can transform rural communities into thriving innovation hubs. A more geographically equitable investment ecosystem will foster stronger economic growth, expand opportunity, and create a more dynamic and inclusive economy nationwide.

Explore where venture capital is flowing—and where it isn’t:

The Rural Private Investment Map shows where venture capital is going in rural (and nonrural) America, highlighting emerging investment patterns and innovative businesses. 

 The data comes from Form D filings, which companies are required to submit after raising capital through a Regulation D investment, providing insight into where private capital is flowing.

Join the accompanying webinar to learn more!

Mark your calendars for Friday, May 30 at 1 p.m. ET for an in-depth webinar on the report’s findings.

In this webinar, we’ll explore:

• Why rural entrepreneurs face systemic barriers to funding
• How the capital gap is impacting rural economies
• What can be done to create a more equitable financial landscape

You’ll also hear directly from a panel of rural thought leaders who bring research, investment, and entrepreneurial perspectives:

• Amanda Weinstein, Director of Knowledge, Research, and Evaluation, Center on Rural Innovation
• Jay Brockhaus, Managing Partner, CORI Innovation Fund
• Sarah Hinkley, CEO and Co-founder, BOPA Precision Agriculture
• Louisa Schibli, Director of Impact and Engagement, RuralWorks Partners

Want to address these issues in your community?

Get in touch with our team today: