Avi Levine


 Lending to Millennials
New Generation, New Rules to Follow

By Avi Levine


Somewhere in between the gossip about the need to hire young professionals to replace the aging work force, and taking a defense stance against all of these shiny new loan products and commercial finance technologies, sits the awful truth of “not why this change is happening, but what we commercial lenders need to do to keep up.” In true Millennial fashion, I apologize in advance for the following unfiltered, brutally honest and unsolicited truth about what our industry has in store for the not-so-distant future, as the Millennial generation continues to replace our more traditional Baby Boomers and Gen X borrowers.


So … Who are the Millennials?

According to U.S. Census Bureau statistics, there are more than 83 million Millennials who were born between 1982 and 20001. This group is more than a quarter of the nation’s population, and makes up a $2.4 trillion market. By 2018, they will be spending more than Baby Boomers, and influencing the purchasing habits of an even greater portion of the population than any other generation. The most interesting thing about Millennials is that, even with over 83 million people and more data and research than any other generation, they are considered one of the most contradictive generations to date. Now maybe that’s just the nature of the Millennials, right? Too much on-hand information to make a quick decision; not enough time to make a smart one.

Access to information, social media and a blatant disregard for doing things the traditional way, have allowed this generation to force a tremendous amount of change upon workplaces, businesses and even religious institutions. Millennials are considered the most diverse population in the United States and worldwide2. Technology and the ease of access to information, news and opportunity has greatly blurred the lines between races and social circles for Millennials; as they come of age, we will continue watching other social and professional norms fall by the wayside. As far as traditional commercial lenders are concerned, it is up to them to determine whether or not to stay relevant, and succumb to a new generation in control with new motivations, and a totally different outlook on the rules and processes we have grown so comfortable with.

What are some Millennial traits?
When it comes to Millennials, their “traits” are not so specific to their generation. Again, being such a diverse and enabled generation, their traits vary greatly, making it difficult to classify Millennials by specific attributes or behavior. Instead, let’s look at five facts that tell us a lot about Millennials and their behaviors as borrowers. While some are quite obvious and others contradict what we understand of them, let’s think about what these facts mean to the commercial finance industry.

Fact 1 – Millennials were brought up on technology3: Dependence on technology is arguably the most prevalent assumption about Millennials. It’s really a no-brainer. The most interesting (and scary) part about this is that Millennials, for the most part, taught themselves about technology. Access to information and the rise of social media really took off while Millennials were in college or younger. They found themselves adopting these things at such a young age, without a parent or older sibling to educate them on the ever-changing landscape of technology and, most importantly, how we use it responsibly. This allowed Millennials to establish what technology means to them with little to no guidance from parents and older generations. It really wasn’t until the tail-end of Millennial births before parents knew they had to play a role in shaping what technology means to their children. Now, their affinity for technology is dictating how not just commercial finance companies, but all companies need to behave towards this generation. No, I don’t mean for you to open a Twitter account, but if you aren’t handling 98% of your communications electronically and providing immediate 24/7 access to information, you are a few steps behind.

Fact 2 – Millennials value community and family more than other generations4: They were forced to experience and watch their parents experience a financial crisis at a relatively young age. This made them realize that education and hard work do not necessarily guarantee a great career and financial stability. This uncertainty has brought Millennials to focus more on family and community responsibilities, ahead of professional and financial goals. Millennials have no problem committing to a career as long as it facilitates work/life balance. They want to achieve personal goals and hold on to family values as they develop into young professionals in their late 20s and 30s.

Fact 3 – Millennials trust less: In response to a long-standing social science survey question, “Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people?” Just 19% of Millennials say most people can be trusted, compared with 31% of Gen Xers, 37% of Silents and 40% of Boomers.”5  They really don’t have to trust people; information can be verified instantly, or if they decide they don’t trust someone, they can simply move on. Considering this point you can relate it to the increased popularity of long form op-ed writing vs. traditional journalism. This is a generation that is more interested in someone or something’s intent above all else. They are more accepting and open to differences in opinions, but less trusting overall.

Fact 4 – Millennials stay at their early careers longer than past generations did in their early to mid-20s: Contrary to what most people think, Millennials are actually very loyal to employers that promote the same community and family values that are important to them. “The median length of job tenure for 25-34 year olds was 3.2 years in 2012, up from 2.7 years in 2002.”6   It’s important that we don’t mistake this as a generation of complacency, because it’s quite the opposite. This loyalty will not be blind, and this group will always have a pulse on what their other options are. They won’t necessarily jump ship for a better opportunity, but in the event their current opportunity fails to support them personally and professionally, they’re out. Remember, being happy is just as important as making money for Millennials.

Fact 5 – Millennials are conservative investors: “Millennials’ attitudes about money, risk and success have been shaped by two unprecedented phenomena: (1) access to lightning-fast technology innovation and (2) dramatic economic and market volatility that constrained their job prospects and earning abilities, as well as disrupted their parents’ real estate values, investment portfolios and retirement savings.”7   Millennials recognize risk as permanent loss and find themselves focused on longer-term goals. They share a more positive outlook on the future, according to a survey of Millennials by Deloitte.8  Most seem to feel that businesses are becoming more socially conscious and offering a more positive impact on society. This impact, much of which is driven by Millennials, has them looking forward to a bright economic future.

What do they want from Commercial Finance Industries?
Millennials need happiness tied to purpose, instant gratification and transparency above all else. This generation has seen and experienced a lot at a young age. They have access to news and information from around the world on their mobile devices; they enjoy traveling on tight budgets vs. extravagant vacations and they are growing up with the most diverse friendship circles to date. The whole idea of what purpose means to them is more related to experiences, helping others and leaving their mark on something meaningful.

From a borrower/lender relationship, all of these basic needs should be met in order to build a strong working relationship with Millennials. As they slowly dig themselves out from tremendous college debt, they are looking for long-term partnerships to build lasting companies. At the same time they recognize how quickly things can change, forcing them to be hesitant with long-term commitments. With such a respect for data and access to information, they realize how easy it is to lose credibility, damage their credit or tarnish their reputation. Furthermore, these concerns lead Millennials to take a much more conservative approach to doing business than past generations.

As it relates to commercial lending, Millennials would much rather give up equity in a company and risk someone else’s investment, with full transparency, than default on a loan that was originally expected to be returned. Unlike past generations that raced to acquire massive amounts of wealth, Millennials are more interested in building something with a purpose that has their name attached to it.

How do we develop loan products that appeal to Millennials?
Commercial lending hasn’t changed much in the past few hundred years. While the mechanics and functionality of commercial lending has remained rather untouched, the technology and systems have changed drastically over the last few years. You can continue about your normal course of business and do OK for another 5-10 years, but if you aren’t focused on how you fit in to modernized ways of doing business, you will find yourself irrelevant shortly after that. As it stands today, traditional factoring and ABL companies are still filling a tremendous need in the market with more conventional products.

In the meantime, how do we offer products to a generation that is so used to getting what they want, when they want it? While the mechanics and lending structures of our core products can’t change much, we can be better at appealing to Millennials through greater transparency, better access to information and improved communication. Below are some suggestions for considering how to better serve Millennial borrowers.

No minimums: Understandably, minimums often coincide with more preferential rates, and no commercial lender wants to hand out more favorable pricing without the commitment of greater volume. Millennial borrowers understand how quickly things can change in their business or the economy as a whole; they don’t want to be on the hook with minimum fees in the event that they’re affected by something out of their control. Sliding price scales or even dynamic pricing structures appeal to this group, as they feel somewhat motivated by having the ability to earn better pricing. If it’s a dynamic pricing structure that fluctuates, vs. external factors, this too allows them to feel they have the ability to make smart decisions and control their pricing.

No miscellaneous costs: Gone are the days of opening facility fees, set up charges and account maintenance charges. Unless you can demonstrate that the labor or effort that goes into these charges is worthy of the fee, scrap them. If they feel they are being subject to arbitrary fees and charges, they will call you out and you will instantly lose your credibility and trust with them. If you have a fee or pass-through cost, just be transparent and upfront, and it will most likely be accepted with little to no hesitation.

Provide Extra Information: Access to information is crucial to Millennials. If they feel like they aren’t getting an answer from you, they will look elsewhere to get it. Answers like “it’s just how it is”, or “it’s been that way for years” are no longer acceptable. A generation that has already challenged so many norms and disrupted so many traditions is not going to accept a salesperson or account executive telling them they can’t do something, “because it’s just how things go.” If you don’t have an answer that supports your decisions, then it’s time for a change. If you find yourself using those answers to explain quirks in your system or delays in communications, then you need to start searching for real solutions.

Increased Flexibility: If you find a Millennial suggesting a new way of doing something, it’s most likely because they are not happy with the status quo or they just don’t understand the situation. Give them some room, and maybe even allow them to be a part of improving your systems. While they are a generation that demands change, they are also respectful of other people’s positions. If there is a certain level of flexibility they need, provide it to them within reason and commit them to owning the outcome. Not only will you have a customer for life, but this may also lead you to your next great organizational improvement.

How do you sell to Millennials?
While on the topic of how to treat Millennial borrowers, we can’t overlook the most important part: how we sell to them. Again, the answer isn’t to send them a tweet or text a bunch of emojis and funny cat videos. Well, maybe the cat videos will work… Millennials have a specific way they like to be treated; they are young, educated, busy and have access to all of the information they could ever need at their fingertips.

Let them decide: Provide the necessary information and give them time. Millennials don’t want you clogging up their inbox, or leaving voicemails. Being conditioned with so much instant gratification through their lives, they will call you on their time; when they are ready to make a decision.

Sell time and convenience: While Millennials are price-aware shoppers, they also appreciate convenience and value. They understand value and place less emphasis on profit than older generations. They are ok paying a little bit more for a better service offering, as long as they know exactly what they are getting.

Recognize the purpose before the profit: It’s not all about the bottom line for this socially conscious generation. They are looking to build relationships that support long-term growth. It is important to recognize that their first motivation to start a business is going to be creating something great, and after that comes profit.

Be Authentic: With so many options and so much available information, if a Millennial buyer gets the feeling that you are not being 100% real with them, you will lose the sale. Authenticity, transparency and credibility mean everything to them.

In Conclusion
Nobody said it was going to be easy. The commercial finance industry has a lot riding on the future of younger generations, and we need to be prepared. There will be some major players rising up out of nowhere, while some of your more conventional lenders slowly fall by the wayside. As we all sit and talk about the changing landscape of the commercial finance industry, in regards to new business models or shaky retail credits, we need to recognize that this change is being driven by Millennials. At the same time, if we are not recognizing the changing needs of commercial borrowers, we will find ourselves sitting at the same table as Radio Shack, Sears and, soon enough, Forever 21.


Avi Levine is a Vice President at Star Funding where he specializes in purchase order funding, factoring and other trade finance solutions. Entrepreneurs look to Avi to provide creative working capital solutions for start-ups and existing businesses.

Email: Alevine@starfunding.com
LinkedIn: www.linkedin.com/in/avilevine
Website: www.starfunding.com



1 https://www.census.gov/newsroom/press-releases/2015/cb15-113.html
2 https://www.whitehouse.gov/sites/default/files/docs/millennials_report.pdf
3 https://www.whitehouse.gov/sites/default/files/docs/millennials_report.pdf
4 http://www.bentley.edu/centers/center-for-women-and-business/millennials-workplace
5 http://www.pewsocialtrends.org/2014/03/07/millennials-in-adulthood/
6 http://www.washingtonpost.com/news/storyline/wp/2014/09/04/millennials-arent-changing-jobs-as-much-thats-a-big-problem-for-the-economy/
7 https://www.ubs.com/content/dam/WealthManagementAmericas/documents/investor-watch-1Q2014-report.pdf
8 http://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-wef-2015-millennial-survey-executivesummary.pdf