Micro-Business Customers Offer Big Potential 

These days, with so many people engaging in entrepreneurial side hustles, singling out micro-business operators who require flexible banking is a promising opportunity for financial institutions. Think additional revenue and cross-promotional opportunities, to start. But the fact that these customers might be camouflaged in retail accounts presents a challenge. 

As the digital economy beckons more workers who want to be their own boss, some people are willing to forgo—or add to—traditional corporate careers to answer the entrepreneurial call, according to data from Citizens Bank and other research.  

Fledgling business operators come to banks as new accounts or existing customers, including contract gig workers who strike out on their own, tech-solutions providers in a maker space whose breakthrough needs cash, or 9-to-5 professionals that add a so-called side hustle then find moonlighting has outpaced the day job. Sometimes the banking customer is a sole proprietor such as a make-up artist, app designer, or a brick-and-mortar plant shop.  

Across the board, these owners increasingly are digital-native, busy individuals seeking bank account onboarding simplicity, around-the-clock transaction access, and small-business financial advice to help navigate economic twists and manage taxes. Some need a line of credit. They increasingly look to upgrade digital payment functionality.  

“Meeting the needs of our ‘side hustle’ customers is becoming increasingly important, especially as young adults take on more of an entrepreneurial path than previous generations,” said Chris Powell, head of deposits and customer engagement at Citizens. 

The bank has conducted a survey on generational career goals and satisfaction. According to the results, two-thirds (67%) of young millennials and Gen Z combined have tried a side hustle or entrepreneurial venture, which respondents said reflected a growing quest for flexibility and autonomy versus pursuing careers at established organizations; about one-quarter said they have a side hustle in addition to a full-time job. 

Some 60% of this polled group aspires to sell their business or take it public one day, which researchers said reflected an expectation their endeavor is a career alternative and not a fleeting interest. The Citizens survey queried 2,300 adults aged 18-34 and showed that instead of chasing traditional status markers like job titles or wealth, this cohort is prioritizing goals such as living debt-free, gaining flexibility, and finding work/life balance. That means relationship banking creates potential value if customer engagement is nurtured for the long term. 

Powell and other banking leaders contacted for this article addressed challenges that banks face in untangling where a personal account relationship stops and a business relationship might pick up.  

Banks that wait too long to make the distinction can risk losing a customer’s confidence that their retail provider notices them, understands them, or may have a suite of products, including tech features, they see in promotions from competitors. After all, a busy entrepreneur, no matter how small the operation, needs a business consultant and banking partner in one. They will have short- and longer-term money management needs and they should be thinking about the security and anti-fraud measures their business requires.  

Under One Roof 

Nearly eight in 10 (78%) respondents to the Citizens survey said they want their bank’s support beyond just saving and spending, with many looking for assistance in paying off debt, building credit, buying homes, and planning for the future. Among young entrepreneurs, the top needs include business banking and payment tools, access to funding, and help managing cash flow. 

Roughly 86% of small business owners use the same financial services provider for their personal and commercial banking needs, according to ProSight research. Of those combination relationships, 65% started in personal deposits, while 25% were formed via business deposits. (For new insights on business banking trends, watch ProSight’s just-released webinar “Small Business 2026 Banking Trends.”)  

Trust is the top factor driving a small business owner to select a particular bank or credit union, according to the ProSight research, regardless of the size of institution. The second most popular reason a bank earned primary status was also consistent across bank size: that bank is home base for the checking account with the highest balance or greatest number of transactions.  

Other popular reasons were varied, though not as prominently favoring one factor over another, including convenience, range of product and service offerings, and payment volume. Respondents also stressed that if they were seeking a new bank for their small business needs, they care now more than ever about how that bank assists with value-adds like financial advice. 

Customers That Hang Around 

For banks, small business accounts tend to be “stickier” compared to other depository accounts. Unlike other types, these accounts often have higher average balances, generate more transaction fee revenue, and demonstrate greater levels of stability over time, ProSight research has shown.  

And banks are smart to notice educational opportunities when retail account patterns provide hints that a customer may be a business in disguise. Banks might advise these customers that while it is true that sole proprietors aren’t required to have separate accounts, at some point their own customers and vendors may appreciate the professional distinction.  

Transaction volume can be limited for some personal accounts and most traditional retail accounts lack essential merchant services like accepting credit cards, ACH payroll, and multi-user access for accountants or if employees are added. And the larger the business becomes, the bigger the risk that the merged activity becomes an audit flag for the IRS for commingling funds.  

Mark Valentino, head of business banking at Citizens, said that while most business customers are categorized where they belong, the bank has prioritized sharper data to uncover any micro business and small- and mid-sized business customers that may be operating from consumer accounts, which is not ideal for the customer or the bank. 

“As we continue to enhance our analytics, we have the opportunity to introduce business banking capabilities authenticated through tailored marketing containers and invitations to apply for a better-suited account,” he said. 

In fact, beyond the retail and commercial bank, Citizens wants to retain startup business accounts that outgrow the “side hustle” label—maybe even to the point that the startups would begin to draw attention from private equity and venture capital firms. Through its Citizens Private Bank, the institution has developed a curated program designed for founders and other smaller business “innovators” that includes liquidity lines of credit and a variety of products the bank describes as flexible capital. Private equity and venture capital professionals are target customers that in recent years might have exclusively tapped funding sources outside of traditional banking. 

Answering the Lending Challenge 

Citizens and other banks know that as small businesses, especially the smallest among them—and the venture capitalists looking to invest—increase in number and become more specialized, banks must be just as flexible when it comes to credit lines and other lending offers. Otherwise, traditional financial institutions risk continuing to cede ground to alternative lenders.  

And signs point to no shortage of need. Demand for government-backed Small Business Administration loans, which are handled through banks, rose in fiscal 2025, one of the strongest years in program history. Projected market growth indicates opportunity for the financial services space. The small business market is expected to reach over $7 trillion in lending volume by 2032, according to Allied Market Research. 

Will Tumulty, CEO of Rapid Finance, a platform-as-a-service (PaaS) for banks providing small business lending, told ProSight that data optimization and technology are the keys to customization for the smallest businesses.  

“Banks have a lot of products already that they can repurpose for serving the small business customer. The issue is, particularly on the capital portion of the lending side, there can be a gap in the way that banks operate,” he said. “On the commercial side, banks are used to deploying capital in large chunks, usually at least a million dollars or more.” 

The challenge, he said, lies with banks relying on deposits to work as loans via a traditional infrastructure. Unlike consumer underwriting, evaluating loan applications for small businesses requires verifications including KYC/KYB compliance, cash flow analysis, and debt-to-income ratio assessments. It’s a level of scrutiny that smaller regional or community financial institutions may struggle to provide quickly and accurately given the limited reporting history of the small business. But it can also frustrate the digital-first, stretched operator who may be willing to take their chances elsewhere. 

“You have a loan officer involved. You have an underwriter involved. You have credit committees involved. And then you must monitor loans, which is also costly. A bank needs to make enough margin on that loan to cover costs beyond the interest paid to depositors,” Tumulty said. “It’s been difficult to make the economics work for micro businesses until only the last 15 years or so, when in some cases fintech and banking have combined to fill this gap.” 

Filling that gap with evolving technology includes allowing banks to better track and project micro-business ebb and flow, since some businesses such as farmers market vendors, barbers, or florists have little to no assets and are strictly a cash-flow operation.  

Some banks opt for a fintech partner to spread out credit risk, combining ona revolving line of credit or a leasing arrangement that might not meet a bank’s credit committee threshold. Some community banks are addressing this challenge by leveraging Lending-as-a-Service (LaaS) technology strategies to promote efficient underwriting and enhance the digital customer journey through an automated, data-driven process that integrates directly into their existing tech stacks. 

Other bank products might include a business Line of Credit (LOC), which enables small business owners to control the amount they draw from their LOC to only the funds they immediately need and typically reduces their exposure to potential fraud compared to traditional small business credit cards. They often can be accessed digitally, which may prove helpful for the unique hours that micro-business operators work. 

Whether these customers emerge on their own from retail accounts, need to be coaxed out and into a better fit, or become new acquisitions through marketing efforts will largely depend on how banks use today’s improved data. It may be as simple as targeted engagement with retail customers. How the relationship evolves from there has endless possibilities.