Large-Project Financing Options for Small Businesses

Everyone is familiar with the time-worn saying, “It takes money to make money.” However cliché, that phrase likely rings especially true for small business owners, solo proprietors, and burgeoning entrepreneurs trying to scale their operations.

When small – or young – businesses are in growth mode, their capital typically needs to be reinvested in more raw materials, new equipment, or additional personnel. They don't always have the available funds to expand production space, build or buy a new facility, or upgrade to more efficient equipment.

So how, then, do small businesses make large purchases, start new construction, or finance other development opportunities?

Weigh Your Options

There are a number of outside funding avenues that can be traveled, each with its own list of pros and cons:

  1. Typical commercial loans
  2. U.S. Small Business Administration (SBA) 504 loans
  3. Local government development agencies, including Madison Development Corporation and Middleton Area Development Corporation
  4. Venture capital investment funds, such as Bascom Ventures for university students and alumni

Lean on the Experts

Whether it's an accountant, an attorney, or a commercial lender, small business owners and entrepreneurs should not be shy about engaging professional partners who specialize in working with businesses at their stage of development. And they should not be afraid to solicit multiple opinions.

Case in point: Some time ago, I spoke to a local hotel owner who had accumulated debt to address flood damage. His banker suggested a second mortgage to cover remodeling and repairs. As I explained the SBA 504 loan program, he wondered why his banker hadn’t suggested that. The truth is, not every lender has experience working with this program, which requires specific knowledge and expertise in navigating its regulations and requirements.

Compare it to healthcare. You wouldn’t want an orthopedic surgeon to perform heart surgery, or a brain surgeon to repair a torn rotator cuff. You need to find an expert who has experience in helping small, growth-oriented businesses overcome cash-flow challenges.

I've found that working at a medium-sized bank in growth mode has proven insightful when helping a small- to medium-sized growing business. Professional partners who work regularly in this area can help you navigate a project like this, which is likely to be your first time going through the process. We can recommend other professionals who can help and can suggest other financing options that may benefit your situation.

By researching all your options, trusting partners with expertise in small business growth, and concentrating on taking advantage of growth opportunities, your small business can enjoy the same access to financing as larger, more established organizations. 

If you'd like to discuss your available options, or anything pertaining to your business and how we can help it grow, please don't hesitate to reach out to me via email or phone at (608) 497-4604.

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