The newest branch of the Flat Black Coffee Co. on Boston’s Franklin Street is – appropriately, given its Financial District location – sleek and comfortable. On the night of its celebratory opening event in early November, it was full of well-wishers as its employees busied themselves distributing free coffee and food.
It’s the fourth stand-alone location for Flat Black, a coffee chain that originated in Dorchester 10 years ago. Co-owner Jeff Chatlos, who proudly shows off Flat Black’s sophisticated brewing techniques and waxes enthusiastic about fair-trade coffee beans, credits one of the café’s key funding sources with making the expansion possible.
That major funding source: Dorchester Bay Economic Development Corp. “They saved us,” Chatlos said, as Dorchester Bay came through with a needed loan when a traditional bank turned them down: “It was their loan that made it possible.”
As a community financial development institution (CDFI) Dorchester Bay engages in a wide variety of community-building financial activities. But a new target area is small business lending, and the institution is ramping up its efforts at a time when they say plenty of good borrowers are left hanging by traditional banks.
Not that banks are willfully neglecting these borrowers, said Dan DeSantis, Dorchester Bay’s director of economic development. They’re restrained by a sluggish economy and tight regulations that keep them from taking chances on borrowers like Flat Black – a growing company that likely wouldn’t have had a problem getting a loan even five years ago.
“We’ve found very skilled people coming to us,” DeSantis said. “We have taken advantage of that.”
Sister Act
DeSantis came to Dorchester Bay in 2010 specifically to help grow its business lending operations. The institution uses its own funding sources as well as direct loans funded through the Small Business Association and the Community Development Financial Institution Program through the U.S. Treasury Department. The institution’s own funding sources include the retirement funds of a group of nuns – a fact that the organization’s leader makes sure to tell borrowers when they close the loans.
It’s quite the incentive, joked Executive Director Jeanne DuBois. “They don’t care as much about the SBA, but they don’t want to hurt the sisters.”
Dorchester Bay has made $5.7 million in small business loans since its lending fund opened up in 1999, DeSantis said. That’s a small number in comparison to traditional banks, to be sure, but the institution has lent about $600,000 of that in this year alone. A couple years ago, small business lending through Dorchester Bay was nonexistent, its leadership said, as the institution focused on its other programs during the depths of the downturn.
John Carusone, president of the Hartford, Conn.-based Bank Analysis Center, which consults for New England financial institutions, said now is an excellent time for institutions like Dorchester Bay to ramp up small business lending.
Tight lending regulations and anemic economic conditions have created an opportunity for CDFIs, he said.
Although CDFIs altogether have about $35 billion in assets nationwide – about 1 percent of all financial institution assets in the country – they serve underserved populations, and there is definitely room to grow, according to Carusone.
Butchers, Bakers, Tattoo Makers
As for Dorchester Bay, it typically makes microloans of less than $50,000 to various local businesses, which are often in Dorchester but can be located anywhere in Boston. Deidra MacLeod, a small business loan officer with Dorchester Bay, said it lends often to groups that banks traditionally consider too high-risk, such as restaurants, small startups or other businesses located in lower-income neighborhoods.
MacLeod and DeSantis tick off an array of businesses that have recently benefitted from Dorchester Bay’s loans: A tattoo parlor in Jamaica Plain, a hostel near the TD Garden, a stained-glass artist, an Irish butcher, a Halal butcher and others.
And as Flat Black’s experience shows, the organization is attempting to support not only startups, but to make larger loans to established businesses that need money for additional locations or equipment to grow their business and make sure they stay a permanent fixture in their communities.
Chatlos, the co-owner of Flat Black, said the company first went to Citizens Bank for a loan, but the bank instead put him in touch with Dorchester Bay. The café needed to expand – coffee is a volume business, Chatlos said, so multiple locations are a necessity – but Citizens was leery about taking a chance on it, thinking perhaps the chain had stretched itself too thin. Dorchester Bay, however, liked what it saw.
“It was fantastic, because they wanted to help a local company expand when times were tough,” Chatlos said.
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