Great ResignationClimate ChangeLeadershipInflationUkraine Invasion

America’s small businesses are fighting for access to capital. Here’s what Fed rate hikes mean for the communities I took a 6,000-mile road trip across the country to visit

September 16, 2022, 1:14 PM UTC
Jerome Powell
Federal Reserve Board Chairman Jerome Powell has signaled the Fed's intention to continue raising interest rates.
Drew Angerer—Getty Images

The health of the economy—and of our small businesses and communities—is tough to gauge, let alone predict. As of this writing, the Federal Reserve is committed to raising rates even higher as we inch toward their next meeting in September a sign that inflation might persist. But the job market remains resilient, a sign that businesses think inflation will calm down.

While access to capital will fluctuate as interest rates rise, America’s small business community will remain ambitious and resourceful through adversity. I’m confident because I’ve recently seen it firsthand.

At the height of the economic transformation caused by the pandemic, I took eight months to tour eight cities. Driving over 6,000 miles, from Chicago to Baltimore, from Cleveland to Cumberland, Maryland, I was amazed by stories of American perseverance. 

But with each story, it became clearer that perseverance alone wouldn’t save small businesses. It requires a complete rethinking of how we build solutions to create new wealth-generating opportunities.

The pandemic has unveiled and exacerbated hardships

In 2020, each day of the pandemic unveiled more uncertainty than the one before. Businesses were shuttering at historic levels, communities were suffering from catastrophic levels of unmet need (from food insecurity to disruptions in education), and people were losing hope. 

I’d spent my entire career trying to enrich communities, celebrate small businesses, and give back. Yet, I was watching as our very own communities and institutions became destabilized, and more vulnerable to the ramifications of unprecedented chaos. 

One day, I came to the realization that instead of sitting by, talking to the people and communities hit hardest would be crucial to restabilizing and revitalizing American communities. Step one: Hit the road. 

Putting an ear to the ground

I set out across the country with my cousin (and now co-founder) Warren Reed to truly gauge the state of small businesses and communities in America amidst the upheaval. 

In just a few short weeks, it became increasingly clear that, without intervention, the outlook for small and medium-sized businesses in America would remain bleak. And it was the lack of opportunity to succeed that was the culprit.

As we went from town to town, business to business, the anguish on the faces of those we talked to was a common thread. Stories of lost jobs, families hanging on by a thread, and business owners losing the companies they’d worked their entire lives to build all began to tell a larger story. 

For every report that came out on the permanent closure of 100,000+ businesses or how Americans were struggling to pay their rent, we had a face, a name, a voice to put to it. We saw the pain and confusion etched into their faces. We heard the frustration and despair in their voices. 

These feelings resonated everywhere we went. As Warren and I debated what kind of solution could best uplift business owners, transform communities, and create widespread opportunity, we couldn’t ignore what we’d heard from a leader in Cumberland: “We’re a town of multi-generational families. We educate our children, but what good is education if there are no jobs? Businesses come for the tax break, but have no personal investment in our people. How are these families expected to survive, how is our community supposed to thrive, without a sustainable local economy? It seems like no one can be convinced to help us create one.”

We knew that if we used our learnings from the road trip as fundamental truths to guide our solution-building, we could replace these feelings of frustration with validation and support, and, most importantly, opportunity.

Breaking down barriers will enrich communities and grow our economy

Based on our conversations with small business owners, community members, and local leaders across the country, we’ve identified three key issues we must collectively address to revitalize America’s communities:

Poor circulation of capital is the root of stagnation 

After eight months, eight cities, and 6,000 miles, it was clear that the poor circulation of capital in our communities and the disparities between communities’ access to capital were nationwide issues. In 2020, over half of small businesses had unmet funding needs. Without capital, businesses can’t launch, grow, or create jobs. 

The longer the Fed keeps interest rates high, the heavier the toll on American business. While it’s important to use every investment tool and policy instrument to fight inflation and reintroduce capital into markets, we have to strike a balance between the overall economic and community impact. Otherwise, both will continue down a rough path.

Improving economic conditions in distressed communities isn’t an “urban” issue, it’s an American one 

Poor circulation of capital reverberates throughout communities–stonewalling potential for progress and sustainable development. Meanwhile, the prevailing assumption is that access to capital is an urban-only problem.

In reality, over 52 million people live in distressed communities or opportunity zones nationwide. It takes one look at HUD’s Opportunity Zone Map to notice that capital access is as important for the heartland of America, as it is for urban or coastal cities.

The way forward? Distribute capital to these communities through public and private sector programs and make sure it stays there through innovation, economic and workforce development, and small business promotion. 

Innovation will accelerate progress 

American businesses and communities face mounting challenges such as economic disparities, inflation, and increasing areas of unmet need. Each day without access to capital is one more day of lost jobs, financial instability and communities cut off from opportunities for growth. 

If we want to not just bring capital to communities, but set them up to thrive in the near future (rate hikes or not), we must invest in scalable, technology-powered solutions that can drive immediate economic and community impact where it’s needed, when it’s needed. Frankly, there is no other option.

Randy Garrett is the co-founder and president of OppZo.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not reflect the opinions and beliefs of Fortune.

More must-read commentary published by Fortune:

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.