Comerica’s Patterson Helps Entrepreneurs Grow Their Waste and Recycling Businesses

Ian Patterson, senior vice president – group manager Environmental Services Department at Comerica Bank, leads a team that develops deep relationships with growing companies across the U.S. and Canada in the waste & recycling industry, providing a source of money when owners have outstripped their savings or do not have the money on hand.

In this Q&A, Patterson, a 40 Under 40 Award recipient, discusses gauging risk; financial benefits that, with the right experience, can come with taking on that risk; and opportunities for growth.

Waste360: Can you discuss risk and why you take this work on, despite those risks?

Patterson: Financial institutions use many methods to determine the riskiness of providing financing to a business. They are going to analyze cashflow, the value of the assets, the ability of management, and the operational risks with the business model.

We often see other financial institutions shy away from the waste & recycling industry because a key metric often used is leverage (debt-to- earnings ratio) as a gauge for the level of risk. At a certain level financial institutions may deem a company with too much leverage as risky.  

Waste & recycling companies often run at much higher leverage levels due to the high cost of equipment, their past or present history of acquisitions. Without taking the time to understand a business, a one-size-fits all model could quickly disqualify or limit a waste & recycling company’s ability to obtain financing. Comerica’s experience with the industry allows us to be comfortable with higher leverage and remain at a responsible level.

If a company is growing, there can be execution risk. Especially if the company is taking on a new revenue project (collection/processing expansions, or greenfield) or completing an acquisition. There is a risk the company will not perform as planned, or there is poor integration of an acquisition. The revenue does not materialize, costs are up, and the company has layered on additional benefit. Often a company might not see the results of their spending for several months, causing a financial institution to question the company’s ability to repay their loans.

However, with Comerica’s experience we are comfortable with this risk.  We have successfully funded hundreds of growth projects and acquisitions.

Financial benefit comes to those that take on risk. Do we see opportunities that we deem as too risky? Absolutely. But, overall, through the lens we look through our calculated risk is less than others might consider and provides a safe return to our shareholders.

Waste360: What financial support does Comerica offer?

Patterson: We offer financial support in three “buckets”:

Project related equipment capital

With our understanding of the industry, we can be more flexible and accommodating for the customer on terms when it comes to capital for equipment. Customers often come to us with capital needs that will increase sustainability, recycling diversion rates, improve safety, and provide efficiencies. Those needs may be for new collection equipment, containers, processing equipment, technology upgrades, and real estate.

Acquisition and new contract capital

Growth of a business can come about organically. Like an award of a new organics or recycling collections and processing program through a municipality. It may take significant investment by the business to obtain the equipment to provide the services to the specifications of the contract. Or a customer may have an opportunity to acquire a competitor, which will help grow their business.

Ownership buyouts and generational planning

There comes a time when business partners want to split paths, have a life-changing event, or want to pass the torch to the next generation or trusted employee. We can provide the financing and guidance needed to complete that transition.  

Within any of these buckets, the traditional banking approach is to value what the assets might be worth and underwrite the cashflow of the business as it stands at that moment. Our approach is not to just value what the assets are worth but to analyze the benefit; to analyze what a new contract/acquisition will bring to the company; and provide benefits within our financing package.

Waste360: What led you into your current role?

Patterson: While in college I aspired to become an entrepreneur, and I thought the best way to learn about businesses was to be on the banking or accounting end to see what makes them tick financially. A professor suggested I start as a commercial banker (providing business loans to any type of company).

However, after working closely with business owners I realized I may not have the guts to put everything on the line like many entrepreneurs do. I did some self-reflection and realized I was good at banking, so I decided to stick with the next best thing and help entrepreneurs grow their business and create wealth for their families (and maybe live a little vicariously through them).

After several years as a generalist, I decided to become a specialist, working with a niche within the waste & recycling industry. After years of successfully building new relationships with customers I was selected to lead a team of bankers to do what I had been doing for eight years. Managing a team is rewarding as it allows me to coach and develop the next level of professionals within my organization.

Waste360: What do you most attribute to your success to?

Patterson: I have been a competitive person all my life, which has made me successful in my career. The introduction of my family – I have been married to my wife for 9 years and have a 7-year-old son and 5-year-old daughter—made me work harder than before. That’s because I was no longer playing for myself but for my “team.”

I try and go about my day with honesty and integrity and not let my competitiveness compromise this. I pride myself as being an advocate for my customers and my organization. I also view my role as being an outlet for the advancement of improving our environment.

Waste360: What do you think are among the most significant changes in waste & recycling since you got into this business?

Patterson: The most significant changes I have seen are in the advancement in technology to improve safety, efficiency, and diversion. Robotics, optical sorting, and artificial intelligence (AI) have improved the way recyclables are processed.

Cameras and safety equipment on collection vehicles have improved safety and supported customer service.

The technology advancements are meaningful but also come with an investment cost. Our ability to understand the return of these investments helps our ability to finance them for business owners.

Waste360: What is your best advice to college students or young professionals thinking about getting into waste management?

Patterson: I have heard the phrase, there is gold in garbage, and I believe it to be true. Not necessarily in a literal sense but in the fact that there is respectable money to be made in the waste business. It will take hard work and getting dirty, but you are doing something tangible. There is value and reward in doing something that others may deem as undesirable.

Waste360: What do you know now that you wish you knew when you started?

Patterson: When I first started, I wish I would have asked more questions. I brought down a lot of pressure on myself that asking too many questions would make me seem unintelligent. When really by not asking questions, it was hindering my knowledge and stunting growth.

Today I must be unafraid to ask questions, I am not the expert on everything. I may ask some “stupid” questions from time to time, but I know that I am likely going to ask some really good ones that will offset them and be worth it.