African American entrepreneurs, for the most part, continue to face the stark realities of operating businesses while lacking access to capital and a team of strategic advisers. Today, these challenges have intensified in a business climate marked by “the COVID-19 economy.”
When the novel coronavirus pandemic struck roughly six months ago, multitudes of companies—from corporate leviathans to mom-and-pop shops—took extreme measures such as setting up remote working arrangements to keep employees safe, furloughing workers due to cash flow crunches, or completely shutting down operations as business evaporated. The conference call was quickly replaced with the Zoom meeting.
As the nation grappled with the devastation wrought by this unprecedented health crisis, its citizens witnessed the insidious nature of the virulent strain of racism. The video of the tragic death of George Floyd in the custody of Minneapolis police officers sparked worldwide, multi-hued protests calling for an end to the cycle of police brutality that plagues communities of color. It also placed a broader, brighter spotlight on systemic discrimination that denied African Americans real equity and opportunity.
Against this backdrop, Fifth Third Bank, the Cincinnati, Ohio-based institution with $203 billion in assets, snapped into action. Among the vital leaders on the front lines: Kala Gibson, executive vice president & head of Business Banking, and Kevin Lavender, executive vice president & head of Commercial Banking. What makes Fifth Third unique is the fact that it represents the only major bank in the nation in which African Americans oversee all of its business lending operations—and you’ll find out why Gibson and Lavender are the right divisional chiefs at the helm during these extraordinary times.
Lending Business Support During The Crisis
Since responding to the COVID-19 pandemic that linked an inexorable public health emergency with economic upheaval and uncertainty, Gibson, a decade-long Fifth Third veteran, has been clocking countless hours. He manages teams nationwide, contacts stakeholders, builds partnerships, and advises legions of clients. His division serves the needs of companies that generate $20 million in revenues or less—a segment that represents 30 million companies nationwide.
“There wasn’t anything that could have prepared me or my team for this moment. Our main goal was just trying to make sure that we as a team stayed focused,” he says. “We have been working 18-hour days. The curveball, obviously, is that we had to do this virtually, so in the midst of a pandemic and a huge economic crisis, everyone is working from home with kids screaming in the background and dogs barking. There was a significant amount of distractions and a significant amount of stress. The goal was to make sure we had a higher purpose and that higher purpose was making sure that we were able to keep as many small businesses in business as possible. It was that rallying cry, that defining moment for us as bankers to do our part and make sure that our customers and our country stayed afloat.”
Gibson absorbed a great deal of that pressure as the company’s executive sponsor of the Payment Protection Program, the Small Business Administration’s $660 billion government-guaranteed loan program that forgave such financing for small businesses that could demonstrate using 75% of those funds for payroll. As a result of their efforts, the indefatigable banker and his team provided a lifeline to about 40,000 companies with roughly $5.4 billion in financing.
“It was critical to us that these funds were available for our customers, specifically our African American businesses, because we knew that this program was going to be short-lived,” he asserts of the program that ended in August.
“There was a lot of anxiety and a lot of craziness in the beginning because you just didn’t know if the government was going to add more money back to the program. I wanted to make sure that we took a very proactive approach to reach out to our customers to make sure that they understood the program and that they were walked through the process.”
Through an endless series of Zoom meetings, Kevin Lavender, his counterpart in commercial finance, used his home as his outpost.
As such, he took a similar all-consuming approach to ensure the financial and strategic needs of clients had been taken care of by his phalanx of bankers. In driving this mission, he remained focused on Fifth Third’s mantra: “Keep the customer at the center of everything we do.” Having dealt with myriad crises during his career, the 15-year Fifth Third vet knew the stakes couldn’t have been higher.
“As an institution, we’ve become much more sophisticated in our approach. We use the term of being an adviser for our clients and to put ourselves in the position of having to advise exclusively by phone was very, very different,” he says, maintaining that 95% of such interactions are typically conducted face-to-face. “To put ourselves in the position of having to determine, sometimes with the client and sometimes on our own, if we felt that they were permanently impaired or temporarily impaired by COVID, which has lots of implications.
“For example, with a $100 million loan, we have to decide quickly if we think we need to send it to our Special Assets Group to get it out of the bank, to liquidate it, or if we think we have enough time and ability to rehab it with the management team in order to remain a client. So my team’s focus was largely centered around reviewing and analyzing the capitalization structure, the capital stack with our clients, giving them advice relative to covenant waivers, payment deferrals, going to the bond markets for recapitalization or doing what we call a short-term, emergency liquidity draw.”
To handle such situations, Lavender’s division must have intimate knowledge of every aspect of a given client’s capital structure, including equity, debt, and other assets, in order to offer advice that will enable major companies to manage through the pandemic as well as position them for a post-COVID future. “We had to make immediate decisions in terms of what’s best for them, and we did it all remotely,” he adds.
Positioning A Black Company to Thrive
Throughout the first wave of the pandemic, both Gibson and Lavender were very much attuned to the unique challenges of Black businesses. Large numbers of them tend to be woefully undercapitalized and prone to being severely weakened during economic crises. What has further served as anathema is that more than 90% of the roughly 2.6 million Black-owned businesses are sole proprietorships and partnerships—the most vulnerable segment during catastrophic conditions. It has been already reported by the National Bureau of Economic Research that some 40% of Black-owned businesses have been shuttered since February.
That’s why early on the two lending leaders placed a special emphasis on finding ways to bolster small Black firms, which Gibson estimates represent roughly 7% of his Business Banking clientele. Not only do the two want such companies to survive COVID-19 but to prove to be innovators that will thrive in a post-pandemic world.
VMX International L.L.C., a Detroit-based environmental consulting firm, represents a client that Fifth Third has helped gain solid footing during the pandemic as it makes plans for future growth.
CEO Vickie Lewis has never seen a business environment quite like the current one. However, she has continually demonstrated resilience when confronting major obstacles. She launched her firm in 2001 to provide waste and recycling solutions for the automotive industry after being laid off and vowing never to be in a position where she depended on someone else for her livelihood and professional growth. Due to proficiency, industrywide connections, and loads of moxie, Lewis was able to grow her company from its origins as a three-person shop with a $500,000 contract with Waste Management.
During VMX’s first several years, she expanded its portfolio of customers through subcontracting jobs with Tier 1 vendors such as Lear Corp., Dana Corp., and PPG Industries Inc. Just as VMX gained traction in the auto industry, General Motors was forced into bankruptcy in 2009 in the wake of the financial meltdown and Great Recession.
“Because we were Tier 2, we didn’t have the direct hit when the automotive industry started laying off people and reducing some of its programs,” she reflects. “Since we worked and supported Waste Management, we didn’t get hit financially. They helped us pivot to new opportunities outside of automotive.”
To further buoy her company, Lewis gained certification through the 8(a) Business Development Program giving VMX access to federal set-aside contracts designated for “socially and economically disadvantaged businesses.” By 2019, VMX had produced revenues of about $9 million and employed roughly 60 workers.
Like many companies, VMX met its greatest challenge when COVID-19 struck. First, she had to establish how VMX would conduct business nationwide by ensuring the safety of her staff and following shelter-in-place laws through remote operations and then communicating regularly with her team via conference calls and Zoom to track projects and assess customer’s needs. However, she lost some business and was forced to reduce headcount by 20 employees at the start of the pandemic.
A critical factor in stabilizing VMX during this period was her long-term relationship with Fifth Third relationship manager Juliana Perry. “VMX has been very, very blessed. We just had the right thinker that has supported us from the time she came to Fifth Third 14 years ago. She has always walked side by side with us,” Lewis asserts. “When people were saying that PPP was coming down the pike and that small businesses would have to be ready to apply, we already knew about it because Juliana contacted us.”
Lewis says Perry helped her through the application process while she “was sick and could hardly even talk. She told me, ‘we’re going to work on it. Fifth Third is working to make sure we have all the bases covered and then we’re going to open the portal so you can apply.’ That’s exactly what happened. They opened the portal. Juliana had a team that worked with her after hours.
I applied for the loan in the evening, got into the system, and within two or three days, we were approved. It was less challenging for us because of our ongoing relationship with our banker.”
Beyond receiving the six-figure PPP financing in early April, Lewis urges Black entrepreneurs to make connections like the one she has with Perry. “As a business, know your banker so that you are not afraid to talk to him or her if you’re having challenges or anticipate something down the road. Fifth Third has several tools that may assist your business.” For instance, Lewis has also been able to maintain liquidity and fortify operations through a line of credit and received help with fraud protection and payment and receivables system upgrades.
Lewis, who is also a graduate of the Goldman Sachs 10,000 Small Businesses program, says Perry has also been instrumental throughout the years in expanding her business network, which has been critical in finding resources and generating new ideas for VMX’s next chapter.
Increasing Racial Equity for a Black Business Ecosystem
Gibson and Lavender believe that such intentional efforts directed at Black businesses will further position them for growth. In an era in which corporate America has made pledges to the advancement of racial equality—including substantive steps to bolster Black businesses—the timing is right for Fifth Third to expand its commitment in this area. For one, it is vital for the economic development of communities of color and African American wealth creation, which can also align with initiatives under the Community Reinvestment Act or CRA.
A key requirement for expression of Fifth Third’s commitment, Lavender urges, is across-the-board diversity and inclusion. He asserts: “I think our country, our bank, will look different two years, five years from now on this specific point. At Fifth Third, with the pandemic as well as George Floyd’s and related unjust murders of Black people, we made it very clear with communication from our CEO and our executive diversity leadership council that today Black lives do matter. Historically, banks like to say, ‘We’re Switzerland. Let all sides do what you need to. But we’re here just to lend money.’
“Looking at our social obligations, particularly as it relates to the Black community, I absolutely believe that it has changed and will continue to change forever. Young people in the bank are very comfortable talking openly about this topic,” adds Lavender. “I do think that we as the financial services industry have an opportunity because we are the lifeblood of communities in terms of spurring commerce. We in the Black community have been shut out from so many different opportunities and I see it as my obligation, Fifth Third’s obligation, to make sure that we put the right people in the right place to give African American entrepreneurs an opportunity. That means making it a priority in the people that I hire, the people I promote, and the way that I pay them. We as an industry and Fifth Third have to get to a position of how we incent our bankers to do the right thing in all communities and, especially at this point, in the Black community. I think we have an opportunity for fundamental change not only at Fifth Third but throughout the country in the financial services business.”
Says Gibson: “I agree with Kevin 100%. What we’ve seen over the last six months are things that we already knew, that there was inequality in our healthcare system and there’s inequality in our financial system and it’s systemic. We have to address it at its root cause and work with our government officials and other advocacy groups to reverse that. As Kevin mentioned, a lot of it is going to start with our hiring practices within our own organizations to make sure that our staff reflects the communities that we serve, that we have the right leadership at the top of these organizations, and at the board level. But it’s also going to require us at the grassroots level too just to make sure that there’s financing, government programs, all the things needed to get us to a place where there is equality when it comes to financial justice as well as health. I think again, we can use our platform in this moment to be able to deliver that.”
Gibson also maintains that what will be required for firms to ultimately innovate and thrive in this construction of an expansive Black business ecosystem. It would not only consist of large banks like Fifth Third but also community banks, MDIs (minority depository institutions), CDFIs (community development financial institutions), and other non-deposit institutions that can provide capital. “Our role as a bank is to nurture that ecosystem with grants, commitments, and investments from our CDC [Community Development Company] as well as partnerships that you develop and start to share,” Gibson says. “I think that on the lower end, a bank’s not going to be able to fulfill all the capital needs of our community because we’re still in a very highly regulated industry.”
To buttress his point, Gibson cites such groups like Mortar, a Cincinnati-based nonprofit resource hub for urban entrepreneurs where he volunteers his time as a mentor and board member, to fulfill that role of ensuring that such businesses grow and advance. He maintains that Fifth Third’s role would be to fund Mortar so that it can increase its capacity to provide capital and technical resources.
Another vital part of the ecosystem: The cadre of successful Black entrepreneurs like VMX’s Vickie Lewis, who can serve as an invaluable source of information, mentorship, and contracts for a network of nascent Black firms.
For example, Lewis’ most recent protégé has been April January, a young operator of a local recycling shredding company that serves as a VMX vendor. She has also helped January gain additional business through introductions to trade groups like the Environment Management Association.
Gibson has met highly influential entrepreneurs such as Albert and Liza Smitherman, who run Jostin Construction, one of the largest Black-owned specialty construction firms in the Southwest region of Ohio. Gibson and the Smitherman’s agree with the philosophy and advocate for larger minority business enterprises aiding the growth and development of smaller MBEs. In fact, Albert says the engagement and support of partnerships with small contractors represents a key part of Jostin’s mission statement.
The Smitherman’s have put that core value into practice through the identification of five companies each year in which they actively mentor and provide contractual opportunities. Over the past decade, Albert says he has groomed some 50 minority and female business owners. “Liza and I decided that the why of our business was to provide a diversity of opportunities for all.”
As Black entrepreneurs continue to navigate COVID-19 and review how corporate America will make good on its racial equity and inclusion pledges, Gibson stresses the need for a dynamic ecosystem: “There is a need for a new model going forward. In the past, we relied on the bank to solve this on their own. The new model must be inclusive and comprehensive of our partnerships with community-based organizations that know-how and where to deploy capital. It’s much bigger than us.”