Diane Mastrull: Shedding an image, lending a paw

When owner Portia Palko needed funds to move her firm, Central Bark, to a larger space in Grays Ferry, PIDC stepped up.
When owner Portia Palko needed funds to move her firm, Central Bark, to a larger space in Grays Ferry, PIDC stepped up. (DAVID M WARREN / Staff)
Posted: November 02, 2012

John Grady doesn't have a dog. The president of Philadelphia Industrial Development Corp. has resisted getting one, despite considerable begging from his three young children.

That's not to say he doesn't see value in canines. Quite the opposite.

That's why PIDC recently guaranteed 50 percent of the $125,000 loan and line of credit that Portia Palko secured from Valley Green Bank to move her dog-day-care business, Central Bark, to a larger facility in Grays Ferry in July.

Not that Palko - a Central Bark franchisee since 2007, who, as a nearly lifelong city resident, was well aware of PIDC - would even have thought to expect help from the 54-year-old economic-development nonprofit associated with some of Philadelphia's most ambitious building projects. Among them: the sports stadiums, the Comcast Center, and the Navy Yard repurposing.

"This isn't industrial; this is just a small business. What are they going to do for me?" Those were Palko's thoughts, she said, when her lawyer mentioned PIDC as a possible source for the financing she needed to renovate the former auto-body shop on Wharton Street, where she and her staff of 10 now tend 80 dogs each day and about 10 overnight.

That's the sort of misimpression PIDC is out to change.

"A few years ago," Grady said, "we started to think how we can expand small-business lending."

The answer: create a subsidiary and pursue a classification for it that is more commonly associated with smaller nonprofits, with substantially more modest profiles. In April, the new entity - PIDC-Regional Development Corp. - was granted status as a community-development financial institution, or CDFI.

As such, PIDC became part of a network of nearly 1,000 entities nationwide committed to helping small businesses gain access to capital.

As I noted in this column about a month ago, banks in this struggling economy remain reluctant to finance small business, which is perceived as a high-risk sector requiring substantial attention and underwriting acumen. So they have increasingly looked to CDFIs to handle those loans. Demand has been far outpacing supply.

Opportunity Finance Network, a Philadelphia-based conglomerate of 202 CDFIs nationwide, recently projected a $694 million shortfall nationally in financing capital for small businesses through the end of the year.

Grady emphasized that smaller CDFIs already frustrated over their inability to serve more businesses need not worry about PIDC's entry into their world - and, presumably, the competition for funds it represents.

"We've all got different territory," he said. "We're not interested in doing $50,000 loans."

PIDC's focus range is $75,000 to $750,000, perhaps small businesses that have outgrown what financial support microlenders - generally most CDFIs - are able to provide.

Grady is quick to note that although PIDC's reputation has been burnished with big-dollar development projects - its track record involves $10.5 billion in financing and 3,000 acres of land sales - small-business lending is something the agency has been doing throughout its history, though mostly in its core manufacturing/industrial concentration.

CDFI status gives PIDC "a credential that commercial banking and the philanthropy world use as a standard," Grady said, adding that those are two funding sources his agency plans to tap now that government budgets are so stressed.

PIDC's foray into another acronym was applauded last week by Mark Pinsky, president and CEO of Opportunity Finance Network, to which PIDC is seeking membership.

"The more CDFIs that exist in the area, the more impact we can make together to create jobs, build community facilities and affordable housing, fund small businesses, and increase access to financial products in low-wealth, low-income, and other disadvantaged communities," Pinsky said Thursday.

At Entrepreneur Works, executive director Leslie Benoliel is already thinking of ways to partner with PIDC, calling it "a more stable institution than many of the financial institutions we see in terms of a consistent partner." Since its establishment in 1989, her small CDFI has issued 350 loans ranging from $500 to $25,000.

Partnering with other CDFIs is something Grady is exploring, he said, noting that "we all share the same mission: How do we increase entrepreneurial activity?" Collaboration could mean microlenders handling smaller loans for PIDC, or even PIDC offering them financing and back-office support, he said.

Meanwhile, PIDC is trying to get a better handle on the region's small-business needs through three pilot programs. One involves direct lending to small businesses; another, guaranteeing loans issued by community banks (such as the Central Bark deal); the third, providing surety bonding for small and minority contractors.

PIDC is funding the programs itself until more is known about underwriting challenges and other issues potential funders would want to know about, Grady said.

Jay Goldstein, president and CEO of Valley Green, said PIDC's guarantee was essential to Palko's getting bank financing for her dog-care business.

Although Palko, 45, had an established small business "with a real and successful customer base" and the bank believed "she had the income to pay for a loan," Goldstein said, because she didn't own the real estate, she didn't have any collateral to secure the loan. "And so the PIDC guarantee program was a way for us to feel that we had enough security to make that loan to Portia."

Goldstein said the bank was hoping to do $5 million to $10 million a year in lending with PIDC. He has no doubt that demand will exist.

"Existing small businesses have stabilized over the last few years," he said, "and are now reaching out to banks to help them expand."


Diane Mastrull:

John Grady describes how Philadelphia Industrial Development Corp., better known for its role in high-profile economic development projects, now is helping small businesses. www.philly.com/business


Contact Diane Mastrull

at 215-854-2466 or dmastrull@phillynews.com,

or follow on Twitter @mastrud.

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