Small Business

Entrepreneur Interviews: Using Loans to Scale a Rapidly Growing Business

We interviewed Laura Mitchell, CEO of Luxury Cake Co., about obtaining a bank loan to take her Chicago startup to the next level and scale accordingly.

Smart entrepreneurs know how to leverage debt to their advantage. Laura Mitchell, owner of Chicago's Luxury Cake Co., did just that when her business hit a wall. She had customers, and thanks to word of mouth, her company was becoming a local hit. However, she quickly began to outgrow her home setup, and if she wanted to grow she needed better equipment and a bigger, more professional space. Laura worked with her local banker to secure a loan and fund a strategic expansion of her business. Taking on debt may seem like a scary prospect, but for many small-business owners, it's the only way to prevent stagnation.

We spoke with Laura about her experiences, the challenges she faced and what advice she has for other entrepreneurs who may find themselves looking to take out a loan.

This interview has been condensed and edited for clarity. If you're a small-business owner interested in sharing your funding story, tweet us at @ValuePenguin.

First, please tell us more about yourself and your business

I haven’t always been an entrepreneur. In fact, I was on a completely different career path when I discovered my passion for baking in 2014. While working as a full-time sales director, I started creating desserts and cakes for events hosted by my family and friends. After mastering the basics of cake decorating by watching instructional YouTube videos, I enrolled at the French Pastry School in Chicago, specializing in cakes. I was hooked.

I graduated in 2016, ready to turn my passion into a career path. Later that year, I officially launched Luxury Cake Co., with a desire to create beautiful desserts that taste as good as they look.

The business was an early success, largely due to word-of-mouth recommendations and inquiries from new clients who saw my unique designs on social media.

When did you decide to seek out financing for your business, and why?

I used personal savings to start Luxury Cake Co., renting a space in a community kitchen and fulfilling orders from my home to avoid high overhead costs. As the business became increasingly popular in the Chicago area, I faced a major dilemma: Orders were coming in, but unless I could afford to invest in a bigger space and professional-grade appliances, my business couldn’t grow.

At that crucial tipping point, I decided to bet on myself and my business and started seeking funding for the first time. I knew a small loan was all it would take to maximize growth, so I started the process by looking for traditional small-business loans under $8,000.

What was your loan seeking process like?

At first, the process of researching financing options was frustrating. I didn’t have previous experience with small-business loans and quickly found that because Luxury Cake Co.wasn’t yet 2 years old and my credit score wasn’t very good, a traditional loan was impossible to secure.

Unsure of how to move forward, I turned to someone I trusted—my local banker at Fifth Third. She walked me through all the funding options available for a small business like mine and connected me with Accion, one of Fifth Third’s community partners, to secure a $7,500 small-business loan with competitive interest rates.

Working with Fifth Third and Accion was seamless. There was an expected amount of paperwork involved, but my banker was great about providing clear explanations of all the financing terms.

What concerns, if any, did you have prior to applying for loans?

Outside of finding a lender, my biggest concern was selecting the right small-business loan. Since launching Luxury Cake Co., I’ve been laser-focused on maintaining manageable, steady growth and keeping overhead costs low, so taking on debt to maximize growth was a very difficult choice.

Luckily, this concern was never a problem, because I wasn’t afraid to ask for help in navigating the process. Before I reviewed a single lending option, my banker took the time to understand not only my business, but also my current concerns and future goals. Armed with professional insight, I was able to confidently select the loan that best fit the unique needs of my business. From this experience, the biggest lesson I learned was the importance of having a personal connection to your lender.

How long did it take you to get your funding?

The process was very fast. In fact, it only took about a week and a half from application to approval confirmation.

Overall, were you happy with the entire process of seeking and applying for a small-business loan?

I’m very happy with my decision to seek out and secure my first small-business loan. The loan allowed me to lease a spot in the Lacuna Lofts in Chicago, build out my showroom for cake tastings and baking, and transition out of the community kitchen to a fully equipped professional kitchen of my own.

The process also made me more confident in Luxury Cake Co.’s finances as I approach my third year of business. I’ve experienced year-over-year growth, but with the added support of the small-business loan, there’s more potential this year than ever before. Now, I’m able to not only take on orders that I previously had to turn down due to limited space, but also expand my client offerings to include specialty cookies, muffins and other pastries.

What advice do you have for small-business owners who may be in your position, and are seeking funding to grow their companies?

Ask for help: Don’t be discouraged if you don’t qualify for a traditional small-business loan. Had I not sat down with my local banker to talk through my business goals and challenges, I wouldn’t have known that Fifth Third had a partnership with a nonprofit lender, Accion, that specializes in microfinancing for businesses like mine. Financing my expansion through Accion was the right path for me and my business, but I wouldn’t have found it on my own. If a small-business owner finds themselves in a similar situation, I strongly recommend they take the time to meet with a professional to get insight on their unique situation. The connection is free, requires no commitment and will be invaluable as their business (and bottom line) grows.

Be flexible with your opening date: After securing my small-business loan, one of my first investments was to lease a kitchen and showroom of my own. Even though I was excited to show off the space, I strategically held off on an immediate grand opening. This gave me time to look for supplies and equipment and truly source bargains, including a chandelier that adds a touch of luxury to my space and a discounted cabinet that I found in the damaged aisle at Home Depot and refurbished at a fraction of the original cost.

Keep overhead costs in check: Overinvesting in your business model can be tempting, but I’ve found maintaining low overhead costs is the key to steady growth. I started Luxury Cake Co. from home and rented a spot in a community kitchen to keep costs low. Then, when I was able to invest in a kitchen and showroom of my own, I selected a loft space instead of a storefront to continue to minimize my overhead. Now, I’m focused on building my brand on social media to drive traffic to my location, which has already paid off.

Robert Harrow

Robert is the head of the Credit Card vertical at ValuePenguin and has been covering the card industry since 2014. His work has been featured in Reuters, Marketwatch, the New York Times and more.