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New analysis compares generational demographic and credit characteristics of small-business owners
Costa Mesa, Calif., Oct. 26, 2015 — Experian®, the leading global information services company, today announced findings from its latest small-business analysis, which compares the demographic and credit characteristics of millennial1 small-business owners with other generations. Interestingly, the analysis showed that 15 percent of millennial small-business owners have not earned a high school diploma. By comparison, the next-highest percentage belongs to Generation X, with fewer than 12 percent not finishing high school. Furthermore, millennial business owners also show the lowest percentage of having completed a bachelor’s degree (16.3 percent); the next lowest belongs to baby boomers, at just less than 19 percent.
“Considering millennials are now the nation’s largest living generation, they potentially could become the country’s most prolific small-business owner population. With that said, it’s important to understand what drives this segment and how they manage their financial obligations,” said Pete Bolin, director of consulting and analytics for Experian Business Information Services. “While millennials may have the highest percentage of those never having enrolled in college, it’s important to keep in mind that it could be a result of a tight job market and high tuition costs, especially shortly after the recession. With technology deeply rooted in today’s younger generation, many have opted for entrepreneurism rather than a college education.”
Experian’s analysis also looked at the most popular industries among millennial small businesses and found correlations with education levels. Findings showed the most popular industries among millennials traditionally don’t require a four-year degree. These include business services (5.9 percent), followed by building cleaning and maintenance (4 percent) and general contractors (3.8 percent). The remaining industries in the top five are motion pictures and video (3.3 percent) and beauty shops (3.2 percent).
From a geographic standpoint, the analysis showed that more than 68 percent of millennial small-business owners established their companies in three states: California (29.3 percent), Texas (21.1 percent) and Florida (18.3 percent). The other states in the top five were Minnesota (6.2 percent) and New York (4.8 percent).
As part of the analysis, Experian also explored the credit and payment behavior of millennial small-business owners. Findings from the report show millennials have the lowest commercial2 and consumer credit scores compared with other generations at 32 and 628, respectively. Moreover, millennials have the highest average delinquency rate (90-plus days) for commercial credit cards (3.6 percent) and the second-highest average delinquency rate (90-plus days) for consumer credit cards (13.3 percent).
However, despite having the lowest commercial and consumer credit scores among the generations, millennials are the most credit-active generation. The analysis found that 17.4 percent of millennial small-business owners opened a commercial account in the past 24 months, while 63.8 percent opened a consumer account during the same time period. Comparatively, the next highest in both categories was Generation X, with 14.5 percent opening a commercial account and 62.7 percent on the consumer side.
Millennials also have the highest commercial credit utilization rate (54 percent), followed by Generation X (51 percent), baby boomers (41 percent) and The Greatest Generation (32 percent).
Commercial credit attributes
|Credit score||Delinquency rate on credit cards||Loan balance||Utilization rate|
|The Greatest Generation||41||2.1%||$10,445||32%|
“Considering that length of credit history is a major contributor to a positive credit profile, it’s not surprising that millennials have the lowest commercial and consumer credit scores. Their age alone puts millennials at a disadvantage,” continued Bolin. “However, millennials appear to have taken the appropriate steps to build their credit by opening new accounts and separating their business credit from their personal credit. As they move forward, it will be increasingly important for them to make timely payments and ensure that their creditors report their payment behavior to commercial credit bureaus so they can build and maintain a positive credit rating.”
Other findings include:
• Millennials have the lowest outstanding commercial loan balance ($6,263), followed by Generation X ($8,989), The Greatest Generation ($10,445) and baby boomers ($11,061).
• More than 27 percent of millennial small-business owners have estimated personal incomes between $50,000 and $74,999.
• The average number of years a millennial small-business owner has been in business is 5.3 years. Comparatively, small-business owners in The Greatest Generation have been in business for an average of 9.3 years.
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1For the purposes of this study, the age breakdown for each generation is as follows: millennials (18–34), Generation X (35–49), baby boomers (50–67) and The Greatest Generation (68 and older).
2Based on a scale of 1 to 100 (with 100 being least risky); predicts the likelihood of severe delinquency (more than 91 days past due) within the next 12 months
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