Modal and non-modal linear stability analysis of channel flow with a dilute particle suspension is presented where particles are assumed to be solid, spherical, and heavy. The two-way coupling between particle and fluid flow is therefore modeled by the Stokes drag only. The results are presented as function of the particle relaxation time and mass fraction. First, we consider exponentially growing perturbations and extend previous findings showing the potential for a significant increase of the critical Reynolds number. The largest stabilization is observed when the ratio between the particle relaxation time and the oscillation period of the wave is of order one. By examining the energy budget, we show that this stabilization is due to the increase of the dissipation caused by the Stokes drag. The observed stabilization has led to the hypothesis that dusty flows can be more stable. However, transition to turbulence is most often subcritical in canonical shear flows where non-modal growth mechanisms are responsible for the initial growth of external disturbances. The non-modal analysis of the particle-laden flow, presented here for the first time, reveals that the transient energy growth is, surprisingly, increased by the presence of particles, in proportion to the particle mass fraction. The generation of streamwise streaks via the lift-up mechanism is still the dominant disturbance-growth mechanism in the particle laden flow; the length scales of the most dangerous disturbances are unaffected, while the initial disturbance growth can be delayed. These results are explained in terms of a dimensionless parameter relating the particle relaxation time to the time scale of the instability. The presence of a dilute solid phase therefore may not always work as a flow-control strategy for maintaining the flow as laminar. Despite the stabilizing effect on modal instabilities, non-modal mechanisms are still strong in internal flows seeded with heavy particles. Our results indicate that the initial stages of transition in dilute suspensions of small particles are similar to the stages in a single phase flow.