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3 Ways Millennials Approach Small-Business Ownership Differently A new study shows that millennial small-business owners have different concerns, needs and plans than their older counterparts.

By Jay DesMarteau


Most small-business owners (SBOs) share certain traits, such as an entrepreneurial mindset and the desire to be their own boss. But the how and why of being business owner looks different across generations, a 2018 Small Business Survey of nearly 580 SBOs by TD Bank revealed.

Millennials frequently are stereotyped as being impulsive and distruptors, but closer insight into how this younger generation operates as business owners shows that in some respects, they are also years ahead of their older counterparts:

Have Credit Needs? Millennials Charge It.

More than three-fourths of SBOs between the age of 18 and 34 reported that they need credit to grow or support their business, compared with only 18 percent of baby boomers (55 and older). This need is unsurprising given that 67 percent expect business revenue growth in 2018 (vs. just 42 of boomers) and 42 percent plan to add staff (compared with 11 percent of Boomers).

At the same time, TD Bank's survey found that more millennials reported that they have been turned down for a credit request. This could be explained, in part, by the fact that some millennials are still building their personal credit scores, stemming largely from their shorter credit histories and large existing debt such as student loans. To raise these scores, it is important for millennials to stay current on student-loan and credit-card payments on their way to establishing longer credit records.

Despite some headlines that young adults are plastic-adverse, younger SBOs are looking to credit cards in greater numbers to finance their businesses. Sixty percent of millennial respondents say they use a business credit card compared with 38 percent of SBOs above the age of 55. In fact, a recent study by Aite Group found that previously credit-shy millennials are far more attracted to credit cards with significant rewards opportunities than their older counterparts, with 78 percent of millennials having applied for a rewards credit card within the past two years compared with 29 percent of cardholders overall.

With some small-business credit cards offering similar perks, it makes sense that younger business owners find it more attractive to swipe for company supplies, marketing and more than their more seasoned peers.

Millennials More Wary of Rising Interest Rates.

Since younger SBOs report greater credit needs, it is unsurprising that nearly three times as many are concerned about the impact of rising interest rates compared with those 55 years old and older. Even a one percent increase in market rates—if passed along in a flexible-rate loan—could make a dent in an SBO's earnings. For newer business owners, this is especially concerning as margins are tight and extra money toward a loan payment might make an impact on whether they can pay a vendor on time or afford advertising.

With one rate hike already implemented in March 2018, and policymakers anticipating two to three more before the end of the year, SBOs are concerned about higher costs of capital. Over the long-term, rising rates may have the net effect of dampening growth and discouraging more millennials from starting a business.

To combat interest-rate angst, SBOs should consider working with a financial institution that offers fixed-rate lending products or refinancing current high-interest debt to lock in lower rates before their loan term expires.

Just Halfway to Retirement, but Better Prepared.

The tumultuous markets have had a lasting effect on young entrepreneurs. After watching the Great Recession decimate their parents' savings and retirement plans, millennial SBOs have taken a different approach, TD Bank numbers show. In fact, 71 percent of millennial SBOs have a succession plan when it comes to exiting their business, whether by selling it, closing it or passing it on to family members. This is compared with only 37 percent of baby boomers who have a succession plan.

No generation can afford to be short-sighted when it comes to succession planning. Without a strategic growth and exit plan, a small business owner could find that their blood, sweat and tears do not pay dividends. According to the survey, 32 percent of older business owners plan to simply close the business when they retire, meaning that they do not expect to extract value from their assets or business model.

Every entrepreneur faces challenges as a business owner, no matter at what age or stage of their business, and understanding these challenges—and the banking and financial resources available to address them—will help to ensure a long and successful career.

This article was written by Jay DesMarteau, Head of Regional Commercial Specialty Segments for TD Bank.

Jay DesMarteau

Head of Regional Commercial Specialty Segments for TD Bank

Jay DesMarteau is the head of small business and government banking distribution for TD Bank. DesMarteau leads teams that provide in-depth expertise for unique, small business customer sets of the regional commercial bank at TD. His group provides small business banking products and services across a variety of industries, including the healthcare and restaurant franchise industries.