The Symbiotic Relationship Between Consumer Lending and Commercial Growth

Consumer lending might not be a top priority at your community bank—but it should be.

It’s common practice at community banks to allocate more of their time, resources, and energy toward commercial lending, and for good reason. Commercial deals typically yield higher margins and bring in more revenue. Plus, consumer lending is notoriously competitive and often less lucrative in the short term.

But ignoring consumer lending entirely is a mistake. It’s more than a standalone revenue stream, it’s a pipeline for your commercial growth.

Commercial Relationships Start with Consumer Connections

Most customers don’t walk through a bank’s door for the first time with a business loan in mind. They start with personal needs: opening a checking account, obtaining a personal loan, or applying for a mortgage. These early financial interactions are the foundation for long-term relationships.

Think back to your own first experience as a bank customer. Personally, I opened my first checking account when I got a job in high school. Later, I took out a loan from that same bank to buy my first car. When it came time to purchase my first home, I didn’t shop around—I went with the bank I already trusted. If I needed business funding, I’d turn to them again, as they’ve always served me well.

This isn’t anecdotal. According to McKinsey & Company, banks that maintain strong consumer lending programs retain 80%–90% of their top-tier commercial clients who began as consumer customers. Those early touchpoints matter and lay the groundwork for future commercial relationships.

The Commercial Potential Within Your Consumer Customers

When banks look to grow their commercial lending portfolio, they may overlook a valuable and often underutilized source of opportunity: their existing consumer customer base. Most commercial relationships begin on the consumer side, and with the right long-term strategy, community banks can identify and nurture future business borrowers already within their ecosystem. Especially now—with shifting generational trends and economic changes—there’s growing potential to support emerging commercial needs from within.

Here are three key segments to watch:

1. Small Businesses in the Early Stages

Many small businesses initially rely on personal loans, especially in the early days before they qualify for traditional commercial credit. According to Gusto’s 2024 New Business Formation Report, 44% of new businesses start as side hustles.

Additionally, the Small Business Administration notes that nearly a quarter of small business owners formalize their operations with an LLC within the first year. Over time, nearly half of small businesses scale into mid-sized enterprises, depending on the industry and access to resources (Bureau of Labor Statistics).

And the U.S. Census Bureau reported over 5.3 million new business applications filed in 2024. That’s millions of entrepreneurs stepping into business ownership each year leveraging consumer products to get started. While not every venture lasts, a significant number go on to grow and mature. If your bank is there at the beginning, you’re well positioned to be their financial partner as those businesses evolve.

2. Millennials and Gen Z

Millennials and Gen Z now make up 52% of all consumer borrowers, per TransUnion’s 2023 Consumer Credit Trends Report. But they’re not just borrowing, they’re building. These generations are among the most entrepreneurial in history, launching more than half of all new businesses according to U.S. Census and Inc. survey data. Inc. also reported that 66% of millennials have goals to start their own business.

Establishing relationships with customers from a young age, especially from these generations, is shown to increase customer retention and CLV. A joint study by TransUnion and Open Lending analyzed over 4 million younger consumers. The study found that 40% of these borrowers returned to the same institution for future loans—demonstrating strong loyalty to the institutions that helped them start their journey.

3. The Golden Tsunami: $84 Trillion in Wealth Changing Hands

The U.S. is currently experiencing the largest generational wealth transfer in history. By 2045, an estimated $84 trillion is expected to be passed down from Baby Boomers to Gen X and Millennials, according to research from Cerulli Associates. This includes a sweeping transformation of business ownership.

Baby Boomers currently own between 50% and 60% of all privately held businesses in the United States, totaling approximately 2.3 million companies. As roughly three-quarters of these owners plan to retire within the next 10 to 15 years, a massive wave of business transitions is on the horizon—what is being referred to as the “Golden Tsunami.”

This generational shift brings with it a demand for financial services, particularly in lending and advisory support. Many of these business transitions will require external financing, whether for ownership buyouts, succession planning, or capital to modernize and expand operations under new leadership. Yet, only 34% of family business owners have a formal succession plan in place, leaving significant gaps—and opportunities—for financial institutions to step in and provide guidance.

For community banks, this moment presents a chance to deepen relationships on both ends of the transition. Successfully supporting an outgoing owner while also meeting the needs of a new one can significantly improve the odds of retaining both parties as long-term clients.

Meet Their Needs Now, So They Come to You Later

In today’s competitive environment, sustainable commercial growth doesn’t come solely from pursuing new business clients. It comes from recognizing the potential already within your existing relationships and helping them grow into something more. Many future business owners are already part of your customer base. If you meet their needs now—through relevant, accessible, and responsive consumer lending—you’re far more likely to be their first call when they need capital to start, expand, or acquire a business.

That’s why consumer lending shouldn’t be treated as a separate initiative from your commercial strategy—it’s the starting point. Today’s personal line of credit, car loan, or mortgage could be the beginning of a long-term relationship that leads to tomorrow’s business banking opportunity.

Once someone has already established financial ties elsewhere, winning their business becomes a much steeper climb. But by investing in them early, you increase your odds of being the institution they trust when the stakes (and loan sizes) are higher.

Reengaging Consumer Borrowers

Today’s consumer borrower is heavily targeted by fintechs, mega-banks, and non-bank lenders, all promising fast approvals, sleek mobile apps, and frictionless experiences. To compete, community banks must not only deliver on the things that matter most--speed, ease, reliability-- but also have smart, targeted outreach.

The good news is that technology is a great equalizer. With the right tools, community banks can streamline operations, target outreach more effectively, and deliver the kind of modern experience customers expect—without sacrificing the personal touch that sets them apart.

5 Ways Technology Can Help You Engage Consumer Borrowers

1. Online/Mobile Options: Give your customers the freedom to borrow from the couch. Self-service options are no longer optional, they’re expected.
2. Community-Based Indirect Lending: Your business customers already have consumer customers of their own—why not serve them together? Indirect programs with local businesses (think HVAC, farm equipment, cosmetic surgery) expand your footprint.
3. Data-Driven Campaigns: Generic campaigns won’t do. Utilize data sets from third parties to help you find the right targets, and create niche campaigns specifically for them.
4. Leverage Your Data: Leverage your own transaction data to identify customers who may benefit from targeted financial solutions—such as debt consolidation, refinancing, or new credit offerings.
5. Fast Walk-Ins: Even as foot traffic declines, walk-ins still happen. Be ready to impress with an insanely fast, start-to-finish loan experience when someone walks in the door.

Consumer Lending as a Growth Strategy

The customers you’re helping today with everyday financial needs may very well become your most important commercial clients tomorrow. When you approach consumer lending as a foundational part of your growth strategy, you can create more pathways for deeper relationships, greater loyalty, and future revenue.

In a landscape where financial services are increasingly transactional, community banks have an edge: personal touch. By pairing a high touch philosophy with the right technology and targeted outreach, you can meet customers where they are and stay with them as their needs evolve.

Disclaimer: Many of the statistics included in this article were generated with the assistance of AI and are based on publicly available data from reputable sources at the time of writing. Some figures may be approximated or paraphrased, and original sources may be behind paywalls, which can lead to discrepancies in search results. We encourage readers to consult primary, up-to-date sources when precise figures are needed.