Lending

Eight Thriving Cottage Industries

Their growth potential makes them prime lending candidates for CUs.

January 11, 2013
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3. Personal waxing and nail salons

Declining unemployment and increased disposable income will enable a greater number of consumers to afford nail care and waxing services.

Nails-only salons will likely diversify their offerings to include services such as massages, facials, and tanning.

Diversification will expand the industry's target market, helping to mitigate revenue volatility and increase the probability that operators will seek out loans for expansion.

4. Online pet food and pet supplies

The number of pets is forecast to grow 2% annually on average during the next five years, which will support revenue growth for homepreneurs offering pet-related services.

Loans will be likely used for start-up or expansion costs. Low barriers to entry and minimal employee skill requirements allow companies to enter this market without much difficulty.

5. Psychic services

Increased citywide regulations will likely be introduced during the next five years, which will result in industry consolidation. This may boost operator interest in small business loans to finance mergers or acquisitions.

With lessened price-based competition due to fewer operators, profit margins are expected to increase slightly by 2017.

6. Party and event planners

As unemployment falls and people have less free time, demand for professional event and party planning will grow.

This will set the stage for more industry entrants—in the five years to 2017, the number of participants is forecast to grow at an average annual rate of 2.5%.

Business loans will enable party and event planners to hire more employees and purchase more supplies to cater to a higher volume of events.

7. Maids, nannies, and gardeners

As the population continues to age, demand for home-care help will grow. If the unemployment rate continues to decline, that means greater per-capita income growth, spurring demand for household staff during the next five years.

Industry employment is expected to rise 3.7% per year on average from 2012 to 2017. As these small businesses expand, they may demand working capital loans to subsidize short-term costs like wages or to purchase inventory or machinery.

8. Performers and creative artists

Improved economic conditions may spur performers to seek loans for self-promotional purposes, such as producing acting reels or contracting for professional photography.

Effective marketing tactics also can help independent artists develop the necessary fan base they need to launch their careers. Anticipate that improved economic conditions will provide more avenues for revenue growth during the next five years.

The bottom line

These industries are mainly composed of regional small businesses that fit into credit unions’ “Main Street” lending activities. Homepreneurs will be attracted to credit unions’ lower fees and transaction costs or specialty services, which many commercial banks won’t offer.

As demand for financial services escalates, expect owners of these cottage industries to seek out loans to expand operations. During the next five years, small business growth potential makes these industries prime lending candidates for credit unions.

 

 

 

 

AGATA KACZANOWSKA is a lead analyst at the Los Angeles-based industry research firm IBISWorld.

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