1 Unlikely Business Partners It''s Time to Level Up We decided to write this book because our story is your story. Our journey typifies the optimism of entrepreneurship as well as the systemic hurdles challenging small businesses more than ever. To launch a business is to be passionate about fearlessly and independently solving a problem. It''s a uniquely American endeavor that has enabled transformative innovation and prosperity. But the promise of business ownership as a ticket to a better life no longer looks as bright as it once did. Despite a record uptick in new business filings during the recovery from the COVID-19 pandemic, entrepreneurship has been on a troubling downward slide for years. The rate of startup creation across the nation plummeted 44 percent between 1978 and 2012, prompting small-business advocates to sound alarms. Pundits often point to the bleak statistic that half of new businesses do not survive five years.

We believe the larger problem is the number of businesses that stay alive but just barely, unable to scale to the point of sustainability. These business owners work harder and harder to grow, only to find that "small" is a permanent status. But you wouldn''t know it from the sky-high ratings for TV shows like ABC''s Shark Tank and the breathless media coverage of Silicon Valley unicorns hatched by young hackers. Turns out those high-tech, high-growth tech startups that grab so many headlines actually make up just 1 percent of all new businesses. For the rest of us, it has never been harder to grow and thrive. As soon as a firm gets a chance to rev up production, close a deal with that dream account, or finally hire people to take on more work, there often isn''t enough fuel in the tank to propel it upward. Instead, the opportunity to grow becomes an existential threat, challenging even the most optimistic entrepreneur. Businesses in this position teeter on a razor''s edge between living to fight another day or running out of steam and calling it quits.

As someone once said to us, the key to entrepreneurship is staying alive long enough to get lucky. But it shouldn''t come down to luck when we know that the most basic need of a small business is access to capital. Capital is how you make your product, how you get your customers, how you tell your story, how you pay your employees. And yet, especially for minority and female-led enterprises, securing that propellant is exceedingly difficult. Minority-owned firms are more likely to be denied bank loans and to pay higher interest rates for credit, and less likely to apply for loans because they rightfully fear they will be denied. At the same time, women-owned ventures account for just 16 percent of conventional small-business loans and 17 percent of SBA loans, even though female-owned firms make up a third of all small companies in the U.S. Big banks have pulled up stakes in poor and rural communities over the last several decades, so they no longer have a personal connection to business owners and local banks struggling to stay afloat.

Compounding the problem is a broken definition: The federal government still considers all firms with fewer than five hundred employees "small" businesses. This broad and outdated catchall lumps together the corner pizza shop, the solo digital-marketing consultant, the general contractor bidding on multimillion dollar government transit projects, and the co-packer with hundreds of workers on an assembly line. When lenders don''t consider the unique circumstances and backgrounds of individual business owners, it filters down into loan applications and credit scoring. Banks assume small businesses are miniature large businesses and evaluate them as unfavorable when they don''t have the same type of collateral and cash flow as more mature businesses. Right now, the small-business lending division of a large bank looks at a truly small business that is new or being bootstrapped by an underrepresented owner, then compares that operation to an entity with five hundred employees. If the bank''s division, which should know better, holds them to the same standard, then of course the real small business will fail in comparison and not be able to qualify for a loan. Furthermore, disparities between Black and white wealth and the nation''s history of redlining means it''s far less likely a Black entrepreneur owns a home to use as collateral for a commercial bank loan. For this reason, many Black business owners cannot access loans from traditional lending institutions and often turn to credit cards, their own savings, or nonprofit community lenders.

The COVID-19 pandemic exposed this inequity and misunderstanding by policy makers. Paycheck Protection Program (PPP) loans meant to help small businesses were administered by traditional banks and quickly snapped up by large and established enterprises. The critical fumble by Congress and the Small Business Administration put many marginalized companies on the brink of closure and some out of business for good. Only 12 percent of Black and Latino business owners who said they applied for federal loans in the spring of 2020 received aid. Forty-five percent of Black and Latinx small-business owners who were still in business in May 2020 reported they would have to close by the end of the year, if not sooner. When it comes to finding investors as a source of capital, it''s no secret that women and other marginalized founders encounter more bias and more obstacles than white men-and it''s already exceedingly difficult to secure venture capital. It''s so tough for most entrepreneurs to access capital that 83 percent of entrepreneurs don''t even use bank loans or VC when starting a business. They dip into retirement savings, run up credit card debt, or ramp up slowly while juggling their day jobs.

Then there is the issue of the cash small businesses lend to their biggest customers. Yes, you read that right. Lend to, not borrow from. You may not realize it, but small firms are collectively the largest lenders in the U.S. because of the payment terms large corporations and government agencies require. As small companies wait thirty, sixty, or one hundred twenty-plus days for customers to pay invoices, we hold more than $1.2 trillion of trade credit-essentially loans we make to our corporate customers for free.

Small businesses can charge interest, but the large company that''s on the hook typically won''t pay it. In a monetary battle between David and Goliath, Goliath wins. Large customers being invoiced by a small business have all the power in the relationship, so they can pay late and still take discounts and not pay interest. Demanding net 30 terms means the more financially liquid customer gets thirty days to pay, and they enjoy thirty days of free credit at the cash-strapped small business''s expense. Small businesses are treated like indentured lenders to corporate America and public institutions. Small businesses fund the bulk of the economy, and yet they''re told to fund our wealthier counterparts, wait to be paid, and like it. Further, access to marketplaces has been severely limited since the 1980s as antitrust regulations meant to guard against monopolies and to spur competition have steadily eroded, enabling the rise of giants that dominate entire industries. Big Tech has thrown up even more barriers to entry.

Companies like Google, Facebook, Apple, and Amazon can control how small firms and creators reach customers in the new algorithm-powered world of targeted consumer advertising. While these behemoths have attempted to respond to the power imbalance, their business models are not designed for anyone''s success but their own. Small businesses have been fighting an uphill battle for decades just to access commerce. These roadblocks keep small businesses small or struggling to grow. It is time to shift the power dynamic for all small businesses, and in Level Up, we will show you how we can do it together. It all starts with our story, when the stars aligned to connect two Southern women with very distinct leadership styles and personalities from wholly different upbringings. We improbably joined forces in 2006, and we have founded and grown two multimillion-dollar enterprises. When we stumbled, we conceived of an innovative way to solve the problem that defeated our company.

We created a fintech startup called Now Corp, which helps small businesses across the U.S. get paid faster. Now Corp has accelerated close to $1 billion in invoice payments to small firms. The idea was born out of the cash-flow challenges we and others experienced and ignited our desire to change the game. In LEVEL UP, we share the story of our fifteen-year journey together. Along the way, we''ve faced hurdles that were far larger and more powerful than we had imagined. We alone cannot overcome the structures that dictate access to capital and commerce.

Yet that revelation should not stop us. To rise above these obstacles, we must start talking about them with one another, with policy makers, and with decision makers. Hundreds of groups have been organized to help small-business owners, and they each have a perspective that matters. But too often, the most broken parts of the system make our challenges look like personal failures, and we rarely discuss those. To galvanize other small-business owners and stakeholders across the entrepreneurial ecosystem, we must tell our stories and deconstruct impediments that are built to keep us outside looking in on growth. A dizzying array of financial, political, and regulatory systems put small-business owners at the.