They’re the least-educated generation of entrepreneurs—and they also have the worst credit.
5 Surprising Findings About Millennial Small Business Owners
Millennials recently surpassed baby boomers as the largest living generation, which could mean they will also become the most prevalent small business owner population, reported Experian, an information services company.
Experian conducted an analysis of what millennial business owners’ demographic and credit characteristics look like.
INFOGRAPHIC: The Millennial Small Business Owner
Some of the most interesting findings:
1. Millennial small business owners tend to be less educated than other generations.
Fifteen percent of millennial small business owners have not earned a high school diploma. By comparison, the next-highest percentage belongs to Generation X, with under 12 percent not finishing high school.
In addition, millennial business owners also show the lowest percentage of having completed a bachelor’s degree (just over 16 percent). The next lowest belongs to baby boomers, at under 19 percent.
“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,” said Pete Bolin, director of consulting and analytics for Experian. “With technology deeply rooted in today’s younger generation, many have opted for entrepreneurism rather than a college education.”
2. The most popular industries among millennial small business owners traditionally don’t require a four-year degree, according to Experian.
These include:
- Business services: 5.9 percent
- Building cleaning and maintenance: 4 percent
- General contracting: 3.8 percent
- Motion pictures and video: 3.3 percent
- Beauty shops: 3.2 percent
3. There are three states that overwhelmingly draw millennial small business owners.
In fact, more than 68 percent established their companies in these three states:
- California: 29.3 percent
- Texas: 21.1 percent
- Florida: 18.3 percent
The other states in the top five were Minnesota (6.2 percent) and New York (4.8 percent).
4. Millennial small business owners have bad credit scores.
They have the lowest commercial credit scores (an average of 32) as well as consumer credit scores (628).
That’s not all, though: Millennials also 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).
That could be a factor of age, though. “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,” Bolin said.
5. But millennial owners also love credit.
Despite having the lowest commercial and consumer credit scores among generations, millennials are the most credit-active. The study 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. 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 appear to have taken the appropriate steps to build their credit by opening new accounts and separating their business credit from their personal credit,” Bolin continued. “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.”
SEE ALSO:
4 Easy Ways to Attract Millennial Workers to Your Small Business
What the Millennial-Majority Workforce Means for Small Business
Are Small Business Owners Overlooking a Crucial Segment?
