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$10M loan program aimed at attracting small contractors wary of Foxconn

With minority-, women- and veteran-owned contractors having shown reluctance to compete for the first set of Foxconn-related contracts, state officials are hoping to stir up more interest through the use of a new loan program.

State officials said on Wednesday they would be using $10 million worth of loans to help small companies hire workers and pay for equipment amid a flood of development marked by Foxconn’s $10 billion Mount Pleasant factory.

It’s all part of a push to coax more certified minority, veteran and women contractors into working on the $10 billion factory Foxconn Technology Group is building in Mount Pleasant. State officials note that small contractors have so far largely shied away from information sessions the state has held to interest companies in bidding on Foxconn work. A commitment from the lead contractors M+W Group and Gilbane also looms large; the companies are seeking to hire small firms for 10 percent of the work on the Foxconn project.

The Wisconsin Housing and Economic Development Authority’s Contractors Loan Guarantee offers to guarantee 50 percent of loans small contractors take out from private lenders, up to a total of $750,000.

“WHEDA is prepared to assist contractors and subcontractors looking to benefit from Foxconn’s economic ripple effect with this financial tool which can ease the pathway to securing necessary loans for their businesses,” Gov. Scott Walker said in a statement.

A recent Wisconsin Department of Workforce Development survey found that small contractors, because of a lack of cash, connections or capacity, have been wary of competing for work on the Foxconn project State officials responded by organizing a pair of information sessions this month for those sorts of companies.

The DWD’s survey, which was sent to 250 companies and returned by 43, found that most small firms expect competing for Foxconn projects to be difficult. Many of them cited obstacles pertaining to cash flow, contract terms that favor large firms and a lack of name-recognition or connections with decision-makers in the industry. One firm also cited bias against women-owned contractors.

Some noted that small firms often cannot successfully compete for work on the Foxconn project without being able to buy equipment and hiring workers quickly. But scaling up in that way is by no means easy, one contractor wrote.

“Increasing your capacity means that your systems have to change and sometimes figuring that out can be an overwhelming challenge,” according to the survey.

Contractors that find themselves on a large job like the Foxconn project have to put in long hours and manage their expenses efficiently, said Brian Mitchell, president of the National Association of Minority Contractors of Wisconsin. The associated costs can leave little room for error.

“Once you have a contract you have to execute,” Mitchell said. “Now you have to make sure you have the cash flow to do it.”

WHEDA’s loan program will help construction firms obtain capital through the use of a “streamlined” loan application, which will take about a week to approve. It will also reduce loan fees to 3 percent at a loan’s closing and impose no annual servicing fees.

Mitchell said most of the contracts let so far on the Foxconn project have favored established companies with access to heavy equipment. A contract calling for soil and site work, for instance, mostly drew bids from large companies – mainly ones that already had their own trucks and other heavy equipment.

Mitchell said small companies may find more opportunities on later phases of the Foxconn project, particularly when buildings start going up, Mitchell said.

In the meantime, small contractors will continue to benefit from events and programs meant to help connect them with cash and other contractors. Some companies might even find the Foxconn project will open other sorts of opportunities. With Foxconn’s factory keeping the big players busy in Racine County, there is likely to be less competition for smaller jobs elsewhere in the state.

“There are a lot of people that don’t even really understand how big of a project this is,” Mitchell said.

About Nate Beck, nbeck@dailyreporter.com

Nate Beck is The Daily Reporter's construction staff writer. He can be reached at (414) 225-1814 (office) or 414-388-5635 (mobile).

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