Cottage industries—businesses that can be started by individuals in their home—present major lending opportunities for credit unions. Many of these “homepreneurs” may already be credit union members, and may also lack access to another lending institution for credit to expand their business. Other small business owners may seek out the low rates and personalized services that credit unions can offer. Consequently, credit unions harness a competitive advantage over other thrifts in this market.
Homepreneurs are likely to offer a service rather than manufacture a product. This is because lower wages and often lower input prices abroad enable foreign producers to offer lower prices for products. Meanwhile, homepreneurs can often provide services locally that are impossible to replicate by remote service providers.
Opportunities emerge amid the pandemic
The COVID-19 (coronavirus) pandemic and the subsequent social distancing measures associated with it has led to a sharp increase in the amount of time many individuals have spent in their homes. In these unprecedented economic conditions, some cottage industries have managed to thrive. Additionally, many industries have experienced growth in the number of individuals operating their businesses within their home.
This trend is expected to continue in some form even after the pandemic subsides, as the pandemic has provided a proof-of-concept that individuals can fully operate businesses from their homes in a variety of industries. These businesses may present unique lending opportunities for credit unions over the five years to 2026. As these self-employed entrepreneurs seek to establish themselves, they are likely to seek loans to invest in their operations.
Online Pet Food & Pet Supply Sales
Revenue for the Online Pet Food and Pet Supply Sales industry grew an estimated 27.2% in 2020 alone, as customers flocked to e-commerce options to follow social distancing guidelines. As this industry has low barriers to entry and low employee skill requirements, entrepreneurs are able to run successful businesses in this industry out of their homes, even while social distancing. Even as demand for e-commerce services returns to an equilibrium as the pandemic subsides, demand for industry services is expected to continue to grow over the five years to 2026.
Online Hobby & Craft Supplies Sales
Online Hobby and Craft Supplies Sales industry has also benefited from growth in demand for e-commerce services, which is reflected by industry revenue growing 9.2% in 2020 alone. While this industry also has larger companies with significant market share, it has long had a large number of entrepreneurs crafting hand-made products in their homes, a trend that the pandemic has accelerated. Moving forward, many home entrepreneurs are expected to continue operating in this industry.
As parents are forced to adjust to virtual schooling for their kids, many are expected to turn to tutors operating from their own homes. While there are larger companies in this industry, many self-employed tutors are also able to start successful tutoring businesses independently. Revenue for the Online Tutoring Services industry is forecast to increase an annualized 2.7% over the five years to 2026, enticing many new online tutors to the industry.
Psychologists, Social Workers and Marriage Counselors
As the coronavirus pandemic spurred major shifts in individuals’ daily lives in 2020, many turned to virtual counseling sessions to deal with these stressors. This has added strength to a broader trend of increased awareness of mental health, which has contributed to industry revenue growth, which has risen an estimated annualized rate of 2.9% over the five years to 2021. Moving forward, virtual sessions are expected to play a growing role in this industry, as practitioners seek to provide patients with increased flexibility, allowing more individuals to operate in this industry out of their own homes.
As individuals have looked for guidance in uncertain times, life coaches have become increasingly sought after as a source of advice. Even as industry revenue struggled in 2020 during the pandemic, many self-employed individuals in this industry were able to reorient their business around virtual coaching sessions, conducting in their own homes. Moving forward, as the number of life coaches increases an annualized 2.9% over the five years to 2026, many life coaches are expected to continue to run their practices out of their homes for increased flexibility.
The coronavirus pandemic has led to a sharp increase in demand for telehealth services. Increasingly, many medical visits that were formerly conducted in a doctor’s office, hospital or other medical facility are able to be done virtually from a provider’s own home. As a result, revenue for the Telehealth Services industry increased an estimated 9.7% in 2020 alone. Even after the pandemic subsides, practitioners are expected to take advantage of the increased flexibility that conducting telehealth operations provides.
Alternative Healthcare Providers
Along with traditional medical services, practitioners within the Alternative Healthcare Providers industry have adapted to the coronavirus pandemic by integrating videoconferencing into their operations. Increased anxiety around both mental and physical health due to the pandemic have enabled providers to operate successful practices based around providing services, such as meditation, yoga and hypnotherapy, from their homes. Moving forward, industry revenue is expected to grow an annualized 1.1% over the five years to 2026, with these homepreneurs acting as a significant part of this industry’s growth.
With gyms across the United States either being closed or perceived as a risk for infection, individuals have sought out alternative methods of physical fitness. While in-person personal training sessions are often unfeasible due to social distancing measures, many personal trainers have successfully shifted to online personal training sessions through videoconferencing. Even as many trainers are eager anticipating the return of in-person sessions, many are also expected to retain virtual operations due to the convenience. Ultimately, the number of operators in this industry is expected to increase an annualized 3.3% over the five years to 2026, including a substantial amount of prospective homepreneurs.
A sturdy foundation for cottage industries
Overall, while the coronavirus pandemic has led to significant disruption across the economy, the increased integration of teleconferencing and other virtual options into various industries has increased the ability of many individuals to run successful businesses out of their homes in a variety of cottage industries. Even as the coronavirus pandemic subsides, it has provided a valuable proof-of-concept for many prospective entrepreneurs seeking to run a successful business out of their own home, which is expected to bolster the strength of cottage industries moving forward.
These industries are mainly composed of regional small businesses that fit into the “Main Street” lending activities of credit unions. Homepreneurs will likely be attracted to credit unions’ lower fees and transaction costs or specialty services, which commercial banks would not be able to offer. Additionally, as demand for such services escalates, operators in the aforementioned industries may seek out loans from credit unions to expedite their expansion. Over the next five years, small business growth potential makes these industries prime lending candidates for credit unions.
