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Banks Should Know These 5 Traits of Millennial Business Owners

Mary Ellen Biery
August 1, 2016
Read Time: 0 min

Everywhere you look, it seems, there are articles about Millennials: Millennial workers, Millennial customers, Millennial homeowners, Millennial voters. This generation -- described often as being born between the early 1980s and early 2000s -- seems to be both hated and loved, depending on the day of the week and who is talking.

No doubt the group, which has surpassed baby boomers as the largest segment of the U.S. population, will be important for bankers to understand. And banks and credit unions looking to grow business loan portfolios, especially, can benefit from insights into Millennial entrepreneurs. As baby boomers move into retirement, it will be the Millennials who inherit or purchase their elders’ businesses, and Millennials will be a growing share of start-up owners. After all, most of the nearly 29 million businesses in the U.S. are small businesses – a trend unlikely to shift much in the coming years.

Banks are critical financing partners for growing enterprises. Eight in 10 business owners report that a major, regional or community bank is their main financing partner for capital. Small banks are currently the preferred lender for most small businesses, particularly for businesses with more than $1 million in annual revenues, according to the Federal Reserve’s 2015 Small Business Credit Survey. It’s vitally important that banks understand this customer segment in order to ensure Millennial business owners aren’t lost to other financing sources, such as non-bank, online lenders and other options arising out of FinTech.


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Wells Fargo recently released survey results from more than 1,000 small business owners, and the financial services company uncovered some important information about Millennial small business owners (defined in the report as born between 1981 and 1997) and how they differ from older business owners (born in 1980 or earlier). Here are five:

Many of them expect rejection. Compared with older small business owners, Millennials often assume that banks are unlikely to give them a loan or line of credit solely due to their age. They also assume banks would turn them down due to the size of their business. According to the Fed’s Small Business Credit Survey, they have reason to expect rejection based on size. Approval rates for both business loans and lines of credit increase as applicant revenues increase, with the smallest firms (firm revenues of less than $1 million) having the lowest approval rates. Financial institutions targeting this age group may consider creating a one-page information sheet educating potential borrowers on all of the factors that play into credit approval.

They’re wary of debt. Most Millennial small business owners (75%) are extremely wary of taking on debt. At the same time, nearly two-thirds see some amount of business debt as necessary for growth. And perhaps unsurprisingly given their youth, they are more likely to say they are willing to take financial risks in order to grow (67 percent) than are older small business owners (54 percent). This underlines the importance of strong credit risk management at financial institutions as they gain more and more Millennial business customers.

They represent a valuable wallet share. More often than their older counterparts, Millennials say they prefer to do all of their personal and business banking with one financial institution. Some 81 percent of Millennial small business owners prefer to do all of their business banking with one financial institution, compared with 77 percent of older small business owners. In addition, three-fourths of Millennials say they are willing to pay more for products and services that help them do a better job of running their business, compared with only two-thirds of older owners. These statistics are reminders that Millennials may need other services from your bank, and they may be willing to pay a premium for them.

If they’re calling, it’s a problem. Many customers across industries prefer to handle their transactions easily and quickly, which is why some banks offer online commercial loan applications. Seven out of 10 Millennial small business owners said they only speak to someone from their bank when there’s a problem. That’s a higher percentage than among older business owners (65 percent). Financial institutions that automate loan administration can build in proactive, transparent communication with customers that may head off problems – identifying covenant expectations, for example.

They are poach-able. Despite their preference to do all of their business and personal banking with one institution, Millennial small business owners are not immune to overtures from other financing sources. Sixty-one percent of them (a slightly higher percentage than among older business owners) said they don’t mind working with multiple service providers for banking needs if it is easy for them to do so. And more than half of Millennial owners agreed with the statement “Digital and peer-to-peer payment tools are making banks and other traditional institutions less important to business owners like me.” Older business owners felt similarly; 46 percent agreed with the statement.

To learn more about how bankers can elevate his or her business client relationships, download the free Abrigo whitepaper, “Doing More for Business Borrowers.”

About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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