“I would describe it as a pretty stable lending environment,” says Dokmanovich, who heads Comerica Bank’s middle-market activities in Southern California. “It’s a lending environment where there’s a lot of commercial banks looking to lend, and terms are relatively attractive.” Smart Business spoke with Dokmanovich about the economy, the lending environment and what it takes to get financing.
Does the strong economy underscore the health of local businesses?
I think it underscores the diversity of the marketplace more than anything else. When one segment gets hurt, a lot of other segments rebound here. For instance, the import business that’s hurting a lot of the manufacturing businesses around the country is really driving a lot of growth in Southern California. The growing level of goods flowing through the Los Angeles port is driving distribution businesses and real estate businesses.
At the same time, there’s a healthy aerospace and defense marketplace out here that isn’t as subject to import pressure and is growing because of security concerns.
What factors determine your ability to lend to a given company?
There’s no easy answer to that question because we look at a lot of different things.
What are some of them?
In order of importance to a traditional middle-market lender, the things that we start with are really the fundamentals: Who’s the management team? What industry and what product? How do all those factors combine to reflect on how healthy the business is going to be going forward?
If we like those things, that lets us be very aggressive in looking at the traditional, paper kind of analysis things that we do cash flow, balance sheet and collateral. But for us, it really all starts with the fundamentals of the business.
Are there typical minimum and maximum deal sizes for the bank?
We normally define the business based on sales size, so, for example, $10 million up to $500 million would be defined as the middle market. From a lending standpoint, normally that’s going to correspond with $1.5 million on the small end, as far as loan size, up to $20 million to $25 million. For smaller companies, we have a separate SBA Lending division, which is among the nation’s top 10 small business lenders, and a Small Business Division serving businesses with annual revenue of $2 million to $10 million.
What are the best opportunities on the lending side right now? Is it for expanding exporting, helping launch new product lines?
I don’t think there’s any single area where I feel it’s a hot opportunity right now. I think what we’re seeing and this is where we’ve seen a lot of growth over the years we continue to see the import business as a growing part of the local economy. It’s a segment of the economy we’ve always had a great experience with and been very aggressive in pursuing.
Aside from that, it’s about what I’ve been saying about the health of this economy: It’s so diverse that we continue to be surprised by the opportunities we find out there a lot of different industries and a lot of different companies that are doing well.
How can business owners and senior executives do a better job of working with banks and other lenders?
In terms of their approach to a lending institution, what we find is important is that there’s good communication with a lending institution. That means communication whether it’s good news or bad news.
One of the questions that we always ask of our business owners is, ‘What keeps you up at night?’ We find that it’s important that we understand what the business owner sees as concerns, and that we really understand the business so that we’re able to react when there are surprises.
It’s important that your lender really understands your business. It’s just critical that there’s an understanding of what’s important and what drives the business so that as events unfold whether it’s positive events like growth and increased need for financing, or when there are surprises that we really focus on being out in front and understanding fundamentally what makes them thrive in the business.
MIKE DOKMANOVICH is executive vice president of Comerica Bank. Reach him at email@example.com or at (213) 486-6250. A national leader in business banking, Comerica Bank has 50 branches in key California markets. Comerica Bank is a subsidiary of Comerica Inc. (NYSE: CMA), with $53.5 billion in assets at March 31, 2005.