Morgan Slemberger

In Montana’s wide-open spaces and rural communities, women entrepreneurs are essential drivers of economic vitality. Yet they face persistent barriers that limit their economic impact including one in particular: access to capital.

In the United States, men are three times more likely to receive business loans than women. Our research indicates that the majority of Montana women business owners do not secure business loans, even when they have a business checking account. In fact, Montana women entrepreneurs make up 64% of those who have not even looked for financing.

Even when a loan is pursued and obtained, women-owned businesses are charged higher interest rates than businesses owned by men. Causes are nuanced; however, the results are fairly obvious: women's inability to expand their businesses inhibits significant economic growth for their community and states as a whole.

As state and federal policymakers look to support overall economic growth and resilience, it’s critical to understand a rural perspective, where just under half of U.S. citizens reside. Non-metro areas have aging populations whose deaths are outpacing births, which requires in-migration dependence for population (and labor force) growth.

Couple the high-density of seniors with the geographical challenges of access to childcare, healthcare, and capital, and there is little surprise that rural economies are struggling. Where metro areas have exceeded pre-pandemic employment rates, non-metro areas still trail behind. Entrepreneurship and business attraction (in-migration) play a key role in rural economic resilience and overall community wellbeing.

Beyond populations and the labor force getting smaller, our Montana research indicates additional barriers to economic growth due to banking deserts, lender consolidation, fewer relationship-based loans, and the proliferation of online, predatory lenders. When 56% of rural women business owners and 69% of Native women business owners indicate “Access to Capital” as their number one issue, compared to 49% of all women business owners in Montana, it is clear that the majority of women in business need support, but even clearer that the state and its business funders are missing an opportunity for local and state economic impact.

So how do policymakers, government programs, advocates, lenders, investors, and financiers make impact on local and statewide economies? There is a simple formula: focus on aspiring and existing women in business. Simple recommendations include:

  • Increasing technical assistance. One way of doing that would be to add state funding for Women’s Business Centers (WBCs) to match the federal contributions, in addition to the Small Business Development Centers (SBDCs).
  • Scaling up effective public programs. Programs like the State Small Business Credit Initiative (SSBCI) and Montana Board of Investments (BOI) have made significant impact for small businesses across the state- giving those programs more resources to continue their good work would be advantageous.
  • Generating more public/private collaborations for funding. The Community Reinvestment Act (CRA) encourages banks to reinvest in Low-to-Moderate Income (LMI) communities they serve. Through CRA, public organizations across the country have partnered with banks to start new funds, varying in type, to target gaps in the funding ecosystem.
  • Outreach and new products. To bolster statewide economic growth, funders should consider targeted campaigns, outreach, and financial products for women and people of color who own businesses.

Continuing forward the status quo, without providing targeted, financial services to more women, has an opportunity cost of $700 billion annually across the globe. That could equate to as much as $453.6 million per year in Montana (U.S. global GDP contributions at 24% and Montana’s to the U.S. at 0.27%).

This distinct, market opportunity for funders and state governments supports LMI populations to thrive, but also makes sense for the overall bottom line of state and funder budgets. Everybody wins. States whose funders take quick action toward access to capital for women, especially rural and Indigenous in Montana, will be first to market with to build relationships that can last decades.

With seed funding from Wells Fargo, Rural Entrepreneurship and Leadership for Women Co-Lab (REAL Women Co-Lab) at the University of Montana started a little over a year ago, to research rural women in business.

We, with our partners, are available to help funders and policymakers explore how to leverage our recent recommendations and research into plans of action. Taking action by supporting rural women entrepreneurs has the opportunity to enhance the overall wellbeing of small towns, as well as state economies across America.