This article is brought to you by the National Center for the Middle Market.
Middle-market firms—with annual revenue of $10 million to $1 billion—form the backbone of the U.S. economy. Their plans for future growth have a clear impact on the country’s prosperity.
In a recent study, the National Center for the Middle Market and the Milken Institute explored near-term expansion plans for middle-market businesses, how the companies plan to fund growth, and how their attitudes toward financing compare to small businesses.
While middle-market firms are more likely than small businesses to expect growth—nearly all middle-market companies plan on expansion over the next 12 months—the majority of firms do not anticipate taking on additional debt to achieve their goals. In fact, like small businesses, middle-market companies maintain a notably conservative attitude about debt. Rather than viewing debt as a tool for growth, most are reluctant to borrow unless it becomes necessary. Middle-market firms are more likely than small businesses to see value in carrying some level of debt, but many prefer low debt levels.
Key findings from the study include:
• Cash is king. Most middle-market firms plan to use cash on hand to fund expansion and new projects in the coming year. They are significantly more likely than small businesses to rely on cash, and upper middle-market firms (with revenue of $100 million to $1 billion) are the biggest proponents of paying as they go, with 70 percent planning to finance growth with existing resources.
The National Center for the Middle Market is a collaboration between GE Capital and The Ohio State University Fisher College of Business. Visit middlemarketcenter.org to download the full report.