How to Start a Business in an Economically Depressed Area

If you are willing to start a business in an economically depressed area, you can potentially benefit from one or more federal, state or local incentives are designed to promote economic development. In addition to contributing to community revitalization, such programs can also help defray some of your operating costs.

• 1

  Regardless of the proposed location of your business, you need to conduct market research to determine whether a customer base exists for your product or service. If your objective is to locate in an economically depressed area, this is an especially critical step because a primary consideration needs to be whether or not potential customers have the necessary levels of income needed to buy your products or services. You should also conduct secondary market research to develop an overall understanding of the demographic, socioeconomic and other relevant factors that can influence consumer behavior and that might be present in the area in which you intend to locate your business.

• 2

  Determine if your business is eligible for federal incentives. The federal government offers incentives to encourage entrepreneurs to start businesses in economically depressed areas. Two examples are the Historically Underutilized Business Zone, or "HUBZone," Program and the Community Renewal Initiative, which are administered by the U.S. Small Business Administration and the U.S. Department of Housing and Urban Development, respectively. Both programs promote economic development through job creation and capital investment in underserved communities. Through the SBA program, you can receive federal contracting preferences by locating your business in one of the designated HUBZone census tracts, which can be found within many urban and rural areas across the country. The HUD programs provide tax credits when you conduct certain specified activities, like hiring employees who reside in designated high-poverty neighborhoods. In addition to locating your business within the designated areas, you must meet several other criteria to qualify for these programs.

• 3

  Determine if your business is eligible for state incentives. Your state might also provide tax credits or other incentives to promote economic development in under-served areas. As with the federal programs, in order for your business to qualify, you must conduct specified activities like create jobs, retrain workers or make certain capital investments. The U.S. Economic Development Administration's website provides links to local economic development agencies, where you can learn about the programs available in your area.