Alphonso Braddy always wanted to own his own business. And last year, with the help of the Minority Investment Development Corporation and the R.I. Department of Transportation, he got the chance.
Using savings and a loan through the DOT that originated with the MIDC, Braddy purchased a tri-axle dump truck, which he uses to compete for roadway construction contracts, as well as other projects. Braddy is doing well enough, in fact, that he is looking to expand the business.
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Phillip Kydd, assistant director of administration at the DOT, said the agency started working with the MIDC in 2003 to increase the level of minority participation in state contracts through its Emerging Business Outreach Initiative.
The goal of the program is twofold: help identify existing minority firms and help them expand into new work and identify people with the aptitude or skill set that could start a business venture, said Kydd.
“A barrier to any small business is access to capital,” he said. A loan through the program finances the cost of equipment and operating costs for the first three or four months of business, he said.
In order to qualify for Federal Highway Administration funds, a goal must be set for a percentage of the state’s contracting dollars that must go to minority enterprises, which in Rhode Island is 10 percent, said Kydd.
Currently about 12 percent of the contracts are completed by minority businesses, but only 2 percent of these contracts are with Native Americans, African Americans and Hispanic Americans, he said, noting Portuguese and women-owned businesses were accounting for a large portion of the minority contracts.
Trucking was a good area for the program to start because there is always a need for more trucks, said Kydd. Now it is expanding to companies working in concrete, curbing and traffic consulting firms.
The DOT approached the MIDC to serve as a financing agency for the program, with the goal of creating more business opportunities for minority enterprises without cutting into existing contractual relationships.
Because construction contract totals have been growing in the last decade – from roughly $75 million a decade ago to nearly $300 million last year – that goal can be accomplished.
The DOT commits $1 million per year to an Emerging Business Trust Fund that is managed by the MIDC. A prospective business will be referred by the DOT to the MIDC, which will make an evaluation for the loan request and forward a recommendation to the DOT, said Kydd. The DOT will then make the final decision on approval and authorization of a drawdown on the Emerging Business Trust Fund. Loans are typically approved for equipment purchases or a contracting job line of credit that will pay for the materials and wages over the course of a project, said Kydd. A dozen loans have been authorized through the program, he said.
Since its founding in 1994, MIDC has made 151 loans to new ventures and existing businesses for a total of $7.8 million, covering startup, capital assets, working capital and business acquisition capital needs, with loans ranging from $25,000 to $250,000.
The loans are considered subordinated debt opening the opportunity to get additional funding from traditional lenders in order to establish a long-term relationship with a bank.
