If home is where the heart is, “rural” is evidently where the people aren’t. The resistance to being labeled as living in a rural location might have something to do with the stigma. To an outsider, living in rural America is all about a void of trendy restaurants, fashionable boutiques and, heaven forbid, sufficient broadband.

“Many business owners may be surprised to find that the USDA supports more than just agriculture. In fact, the USDA has a series of loan programs that don’t necessarily have anything to do with agriculture.”

To the typical commercial mortgage broker, the misunderstandings can run deeper. If rural living is unfamiliar, a successful rural enterprise is unfathomable.

Such judgments make closing deals in rural America — however enigmatic the label may be — a bit different than doing so in the rest of the country. While financing a business acquisition in the heartland may seem similar to a deal in a large metro area, there are some unique challenges faced by mortgage brokers and lenders that work with businesses in rural areas.

Heartland hurdles

Access to capital is one of the main issues facing small businesses across the country. This can be even more of a problem in some rural areas where there are few banks or other lending institutions from which to choose. On top of financing issues, businesses in rural America were also impacted by the COVID-19 pandemic and the resulting shutdowns.

Another hurdle is less about opportunity and more about familiarity. Like anywhere in the country, lenders are reluctant to lend to operations they don’t understand. For too many lenders, the concept of making a bottom-line profit in a sparsely populated location is simply unthinkable. Therefore, many lenders are not interested in funding businesses in these areas.

Rural regions also may lack some of the necessary infrastructure to help businesses thrive, such as high-speed internet, transportation networks and skilled workers. This can make it more difficult for business owners to secure loans as well as customers. The irony? Solving some parts of the infrastructure puzzle may be less burdensome outside the imposing reach of big-city building codes and high-rise towers.

Small towns also have unspoken boundaries that must be observed. Commercial mortgage brokers working with these types of clients must do so with care as a tight-knit community can often be more easily disrupted than one in a large metro area. It is essential for any project to maintain a deep understanding of the history and makeup of the market. Only with such finesse can you thread the needle of contributing to the community without disrupting or offending the locals.

A helpful hand

In response to the unique issues facing businesses that seek capital in rural areas, the U.S. Department of Agriculture (USDA) created its Rural Development program. Many business owners may be surprised to find that the USDA supports more than just agriculture. In fact, the USDA has a series of loan programs that don’t necessarily have anything to do with agriculture.

 One of the agency’s most popular options is the USDA business and industry loan program, which supports entrepreneurs and businesses of all sizes with loans of up to $25 million. The catch is that businesses must operate in communities with a population of 50,000 or less. This is an all-encompassing loan program that fits nearly all types of businesses, including manufacturing and production companies, family entertainment centers, hospitality and retail assets, nonprofits and more. It can be used for many purposes, including acquisitions, refinancing, equipment purchases and working capital.

There is also the USDA community facilities loan program, which support health care and child care services, education, utilities and more. Other funding options include the USDA Rural Energy for America Program, which offers loans and grants to agricultural producers and small businesses to upgrade, replace or construct energy-efficient systems and renewable energy facilities. USDA food supply chain loans help to support nearly every aspect of the food chain, from farms to cold storage and distribution. The program, which offers up to $40 million per borrower, is temporary and has a total funding budget of $1 billion.

These government-guaranteed programs follow the lead of similar programs from the U.S. Small Business Administration and partner with lenders to reduce the risks associated with rural lending. The USDA offers various guarantees by loan amount and lenders can offer businesses up to 100% financing in some cases. These programs help to alleviate the primary concerns of risk-averse lenders, and they allow funds to flow to the infrastructure and amenities that make rural communities strong. The USDA understands that keeping agriculture alive requires a flourishing rural America. One simply cannot survive without the other.

Rural renaissance

Due to the post-pandemic work-from-home movement, rural communities appear to be more popular than ever. COVID-19 made unexpected living preferences plain: When workers were freed up to work remotely, overcrowded metro areas were suddenly forced out of fashion.

Many high-earning tech workers flocked to the natural beauty and quiet comforts of the rural parts of America. What the future of work will be is anyone’s guess, but it’s clear that the charms of small-town living are being discovered by members of a new generation.

Rural America also holds benefits for small businesses. According to the nonprofit SCORE, which works to boost small business and entrepreneurship, the cost of starting and running a business in a rural area is typically lower than in an urban area. This provides a distinct advantage to entrepreneurs looking to bootstrap their businesses and attract investors in search of lower-cost opportunities.

These costs may have something to do with the fact that rural businesses actually outperform their urban counterparts in some key metrics. According to a survey from the 12 Federal Reserve Banks, rural businesses have higher profit margins and longer survival rates than urban businesses.

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Whether you live amid skyscrapers or open sky, the concept of rural America is likely an enigma. But this is changing. After the past few years of remote-work growth, small towns have been thrust into the spotlight.

For commercial mortgage brokers and lenders, the 17% of businesses that operate in rural communities may seem like risky options. But a closer look at the details may change their minds. While rural businesses grow more slowly, they tend to be in lower-cost industries and are more likely to be profitable.

Combine such statistics with the USDA’s Rural Development loan programs and mortgage brokers should be excited about securing capital for businesses in the nation’s heartland. The USDA’s financing options stand at the ready to fund rural America’s next renaissance. ●

The post Financing the Heartland appeared first on Scotsman Guide.

Sometimes, they’re correct. After all, a mortgage lender can sell a loan on the secondary market without the consent of the broker or the borrower. And while the loan’s interest rate and terms may remain consistent, the borrower’s experience sometimes spans only a few months before the baton is passed to another lender or servicer.

Ask borrowers for sob stories about the loan process, however, and the opportunities for differentiation come through loud and clear. There will be talk of incompetent brokers, hidden fees, and lenders that are unfamiliar with certain types of businesses or ignorant of rural enterprises. The bottom line is that the limits of rates and terms are exposed, creating plentiful opportunities for quality brokers and lenders to stand out.

Lending niche

Banks can be a prime example. As an institution with rural businesses as its clientele, one bank’s specialty niche was clear. But the lender spent much of its early years fighting against being branded as such. The company avoided typecasting its brand and chose instead to paint a picture of lending widely to nationwide borrowers of many varieties.

The result? The bank’s generic image gave borrowers, brokers and agents little reason to seek out its services or tap the team’s deep knowledge of rural enterprise. The irony is the bank had already identified and honed its niche. All that was left was the marketing lift. A few years ago, company leadership finally embraced their rural specialty. As the COVID-19 pandemic hit and the world began flailing with unpredictability, the bank’s public image became narrow and precise: It was focused on rural America.

The precision paid off and the bank became a top performer. Mortgage brokers searching their mental Rolodexes for competitively priced funding for rural employers and entrepreneurs finally had a go-to lender for such requests.

For a broker, a niche can be a specific customer base, such as California restaurants or New Jersey infrastructure projects. It also could be more akin to a value proposition, such as low closing costs or white-glove service. A mortgage lender might specialize in efficiency (e.g., Rocket Mortgage) or high-touch night and weekend availability for prequalification letters in a competitive market. In today’s options-laden marketplace, the key isn’t to be all things to all people. It’s to be something stellar for someone specific.

Focused marketing

Parallels can be drawn from the insurance industry. Although the claims process may vary widely, one wouldn’t know it when consulting side-by-side charts of premiums, deductibles and coverage areas. Faced with seemingly symmetrical options, a customer’s final decision might come down to their emotional attachment to a gecko, a duck or an apron-clad Flo.

What can mortgage brokers and lenders learn from the insurance space? That brand-building efforts are essential. Consider the astounding volume of advertising purchased by some of the country’s best-known insurance carriers. Geico spent $2.1 billion on advertising in 2021 while Progressive dished out $1.9 billion. These insurers are well aware that competing on price and coverage isn’t enough to win market share. Brand awareness is key, while gaining it requires significant investment in a commoditized space.

Consider for a moment how deeply each of the major insurance companies’ value propositions have seeped into your own consciousness. What do you know about Geico? Probably that 15 minutes could save you 15% or more (savings). How about State Farm? Like a good neighbor, State Farm is there (reliability). Progressive?

Now that’s progressive (efficiency).

Did you notice something? While each of these attributes — savings, reliability and efficiency — likely are on the list of any insurance shopper, each brand homed in on a single one. Are they all things to all people? No. Instead, each company targeted a single differentiator, then proclaimed their finely tuned message with volume, repetition and creativity.

Being contrarian

Once a mortgage company has identified a niche, it’s time to publicize it. But in these difficult economic times, one might be thinking, “Hold on. In a recession, advertising is the first expense to go. Right?” Right and wrong. When brands tighten budgets, marketing is indeed among the first expenses to be cut. And that’s when market share is up for grabs.

To explain, consider the 1929 breakfast table. That year, two brands (Kellogg’s and Post) competed for cereal domination. In 1930, with the Great Depression raging, Post made the predictable move to rein in ad spending. Kellogg’s, on the other hand, seized the opportunity to saturate the abandoned space with marketing efforts. Three years later, the depression remained, yet the profit margin for Kellogg’s had grown by 30%.

Think this correlation was a fluke? Fast forward 70 years. In the wake of the 9/11 terrorist attacks on American soil, the economy was trembling and brands of all kinds were once again trimming their marketing efforts. With consumers tightening their discretionary spending, automakers were among the hardest hit.

Yet General Motors bucked convention and leaned into its roots as a company that had survived two world wars and the Great Depression. It blanketed the airwaves and newspaper pages with ads declaring interest-free financing and a bold declaration: “Keep America Rolling.” Other automakers were forced to follow suit, with Ford pledging to do its part to “move America forward.” The incentive-laden business of selling cars has never been the same since.

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What direction the U.S. economy will take in the next 12 to 24 months is anyone’s guess. But one thing is certain: Brands that avoid catering to a specific clientele with a stellar product will fail while those that embrace a niche and invest in the required publicity efforts will grow. A company’s customers, employees and future market share may hinge on realizing the importance of a simple concept: Find your niche. ●

The post Finding Your Niche appeared first on Scotsman Guide.

Intentional placements

Why the fuss?

Changing algorithms

Juggling jargon

Crucial terms

Action steps

• 160 characters or less
• Distinct summaries for each page
• No redundancy (avoid duplicate meta descriptions)
• Sentence case (not written in lowercase for robots)
• Balance being descriptive and concise
• Mirror a human’s search intent
• Located in logical places

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