The Business Development Co. is a for-profit corporation chartered to create jobs by lending money to companies that can’t get all the capital they need from traditional sources. As the company’s president at its offices in Providence’s downtown financial district, Peter C. Dorsey Jr. has more than two decades of experience financing emerging and smaller companies. At The Business Development Co. since 1995, he has been responsible for underwriting and managing the company’s loan portfolio, which averages 40 companies across a spectrum of industries.
In addition, he sits on the company’s board of directors, a majority of which are executives at banks with operations in Rhode Island. During his tenure, he also served as a founder and executive director of the Cherrystone Angel Group, dubbed as Rhode Island’s first “angel” investment group. He holds a master’s degree in business administration from the University of Rhode Island, as well as a bachelor’s degree in economics from Bucknell University.
PBN: Where does your company gets its funding for lending?
DORSEY: A consortium of 10 local banks provided the lion’s share of our equity capital, allowing us to make loans that facilitate local companies creating and retaining jobs. That funding was a one-time investment, so sustaining our mission hinges on collecting and recycling those dollars. More recently, Commerce RI [the state’s quasi-public economic development agency] provided a small sum of loan capital through the Small Business Assistance Program, and we’re able to leverage that money by match funding with our own equity.
PBN: What enables your company to make loans that most banks won’t?
DORSEY: It’s a combination of our mission to create jobs, and [an] exclusive focus on loans, and having enough confidence in our experience to know when to stick our necks out. We aren’t regulated like a bank because we are not risking depositors’ money; however, like any bank, we can’t afford significant loan losses.
There are usually fundamentally sound reasons for banks declining a loan request, and we don’t have a magic wand that turns an ill-advised loan request into a good loan. Between the obviously good and bad is a gray area of unique circumstances, and we have to quickly assess the team’s strength, whether the business opportunity is compelling, and [whether] the cash flow needed to repay the loan can be validated.
We’ll work harder than a bank in trying to identify and understand a company’s underlying strengths and have enjoyed mutual success with business owners who are equally committed, objective and rigorous on planning and execution.
PBN: Your company specializes in making loans to businesses that may not be in the strongest financial position, but what are some of the minimum requirements you look for when deciding a loan?
DORSEY: A management team has to be objective and own their decisions. We can often get past an isolated bump in the road; however, we discourage companies from taking on additional debt when the business model remains broken. We can stretch further on a risky loan when there’s collateral, but collateral isn’t a prerequisite for a company with positive trends and adequate cash flow to service our loan.
PBN: How have industrywide increases in commercial lending in recent years affected your company’s volume of business?
DORSEY: Our client portfolio has significantly increased over the past two years, and that’s despite banks remaining fairly active. Online lending is attracting a lot of visibility as a new source of capital; however, in its current state it is serving unsophisticated or desperate borrowers with fairly onerous terms, and those people aren’t our market. Online algorithms will eventually improve to the point where capital can be accessed at truly cost-competitive rates without human involvement, and that’s when it’s time for me to retire!
PBN: Based on what you’ve been seeing in this market, are there any signs of a slowdown in the local business cycle?
DORSEY: We work across a diverse range of industries. There hasn’t been any indication of a slowdown in our clients serving construction or consumer spending, and that’s the first place I’d expect to see it. A downturn isn’t an if, it’s a when. Business owners don’t need to start running around like the sky is falling, but they need to contemplate how they would manage a downturn’s impact.
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.