🔒With new state incentive, second business industrial development corp. launches in New Haven

Business and industrial development corporations (BIDCOs) are small private lenders focused on lending to disadvantaged communities, and they’ve been a rarity in Connecticut.

Capital Business Lenders, which launched in Hartford in 2022, was the state’s only BIDCO until last December, when Better Local Capital was incorporated with a New Haven address. It got its state lending license in September and, like its Hartford cousin, aims to tap into a $15 million grant pool created by the state legislature in 2023 to support the formation of BIDCOs.

Better Local Capital is led by CEO Mark Hayles, who previously worked as a business advisor with the Connecticut Small Business Development Center; and Chief Operating Officer Calvin Vinal, who led community development lender Capital for Change for 13 years.

Hayles said Better Local will start out providing loans for operating capital, generally for periods of three months to a year, at annualized interest rates of 6% to 12%. That’s a far cry, he said, from the 25% interest some small business owners pay for short-term capital through credit cards.

“Short-term capital is really the key,” Vinal said. “There is tremendous demand in the marketplace from historically underserved and disadvantaged populations.”

Better Local won’t turn away any potential borrowers, but will focus its energy on minority and underserved populations, particularly business owners who would otherwise struggle to gain credit from traditional lenders. Hayles said Better Local will assess character as well as FICO scores when judging creditworthiness.

“And so, we’re trying to look at ways in which we can help these businesses navigate better pathways to capital and, ultimately, back into the traditional lending market with the mainstream banks,” Hayles said.

Under state law, a BIDCO must have a net worth of at least $2.5 million to be licensed. Hayles and Vinal said they’ve received $2.8 million in low-interest loans from banks, and are close to closing on another $1 million.

State lawmakers created the $15 million BIDCO grant pool in an effort to boost small business lending in underserved communities. The law allows for grants of up to $5 million per institution.

Hayles said Better Local will pursue some of that funding, with a goal of raising $20 million in capital and awarding 77 loans in its first year; it hopes to reach 360 loans by year three.

The group currently employs four people and expects to grow to a staff of 10 within three years, he said.