Cottage industries—businesses that can be started by individuals in their homes—present major lending opportunities for credit unions.
Many of these “homepreneurs” may already be credit union members, and they may lack access to another financial institution for credit to expand their business.
These small business owners may seek out the low rates and personalized services that credit unions can offer, giving credit unions a competitive advantage over other providers in this market.
Homepreneurs are likely to offer a service rather than manufacture a product. They typically provide services locally that are impossible to replicate by remote service providers or low-wage foreign firms.
10-Year Annualized Revenue Growth (2007 to 2017)
|Psychologists, social workers, and marriage counselors||5.0%|
|Alternative healthcare providers||4.2|
|Online pet food and pet supply sales||3.5|
|Personal waxing and nail salons||3.1|
|Party and event planners||1.0|
|Maids, nannies, and gardeners||0.8|
|Performers and creative artists||0.6%|
In particular, growth and consolidation among personal care, household, and entertainment service providers may harbor the most alluring opportunities for credit unions during the next five years, according to analysis from industry research firm IBISWorld [ibisworld.com].
To isolate industries that average about one employee per enterprise, IBISWorld recently queried its database of more than 1,000 industries. This table shows a revenue forecast for cottage industries projected to grow most quickly during a 10-year period.
These cottage industries present unique lending opportunities for credit unions, as growing businesses are likely to seek out loans to invest in their operations to foster even faster growth or higher returns.
1. Psychologists, social workers and marriage counselors
Two-thirds of American adults and one-third of children who need mental health treatment do not receive it, according to the National Mental Health Association.
A reform-mandated increase in insurance coverage for psychological services is expected to help psychologists address this unmet need and open or expand such businesses.
Private practices can be lucrative for individual operators, so healthcare changes will provide an incentive for new businesses. Smaller operators without institutional financial backing will be most likely to seek out loans during the next five years.
2. Alternative healthcare providers
Healthcare reform prohibits health insurance companies from discriminating against licensed alternative healthcare providers, so these businesses should benefit as more people enjoy coverage for services. Alternative health care providers include meditation, yoga, and massage therapists.
Billing and coding for insurance payments is time-consuming and costly for small alternative providers. Expect industry consolidation, as larger operations are better able to properly perform these functions.
The number of industry operators is projected to decline approximately 4% per year on average during the five years leading to 2017. Consolidating firms may seek out small business loans, and their operating profits will likely benefit from post-merger synergies.
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