Lending to Millennial Business Owners

by: Smith and Howard

September 12, 2017

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Before your bank can target millennials (generally defined as those born between 1980 and 2000), it’s important to understand the size of this population and their need for debt. Here’s a snapshot of the millennial generation — and the corresponding opportunities for lenders.

Market size. According to the U.S. Census Bureau, the millennial generation consists of 92 million people. By comparison, Generation X (those born in the early 1960s to late 1970s) has 61 million people and Baby Boomers (those born in the late 1940s to 1960) 77 million. Millennials also are likely to live longer than previous generations. Generally, they take better care of themselves, eat more healthily and exercise more than either Generation Xers or Baby Boomers.

Technology use. As the first generation to grow up with the Internet, millennials have embraced technology as part of their daily lives from a young age. Some experts estimate that millennials spend as much as 18 hours a day online. According to research conducted by Javelin, unlike previous generations, millennials talk less on the phone, and prefer texting or social media messaging to emailing.

Personal debt. According to the Institute for College Access and Success, in 2015, undergraduates owed an average of $30,100 in student loan debt. Lower employment rates mean that roughly a quarter of millennials are married and live in their own households, with approximately 30% living with their parents. As the population ages, millennials will need to secure mortgages to set up their own households.

Prime business lending target. Global research conducted by BNP Paribas and Scorpio Partnership estimates that millennials own twice as many businesses than Baby Boomers do and launched them at an earlier age. On average, millennials started their first businesses in their mid-twenties, compared with Baby Boomers, who began operations at age 37. They run bigger businesses than their parents, too — with millennial businesses having 122 employees on average, compared with 33 employees in a typical Baby Boomer’s organization.   

As they transition into adulthood, millennials show a willingness to take on debt and launch new businesses. They also take better care of themselves than previous generations did, which translates to longer lifespans. Consequently, by establishing a financial relationship today, bankers can reap the long-term benefits.

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