Funding For the Middle

Last Thursday the National Middle Market Summit kicked off. Bankrolled by the likes of GE Capital and Fed Ex, “Leading from the Middle” attempted to bring more visibility to the ‘mid-market companies’ defined as firms with revenues between $10 million and $1 billion. Among the A-list speakers were GE CEO and Obama ‘Jobs Czar’ Jeff Immelt, CEO Marc Benioff, and retired General Stanley McChrystal. As part of the summit Ohio State, the academic partner, released the results of a survey its Fisher School of Business performed on over 2000 executives from middle market companies. This study was billed as one of the most extensive ever completed and the results had some interesting highlights summarized by this MarketWatch article.

While I have yet to comb through the full report, the general gist is that the middle market is large, diverse, and wildly important to the US economy and job growth. In addition, the report stated that 55% of middle market firms say they face challenges when it comes to accessing money from capital markets and 71% are challenged by regulatory compliance.

This is great information, but begs the questions of why? Why can’t half of middle market companies get the capital access they need?

Of course some of this is scale. Big firms are big; and therefore have access to the Wall Street finance mega machine. But, anecdotally at least, there seems to be another concern: middle market firms lack the level of data and analysis that their bigger counterparts enjoy. A knowledge gap is a risk that gets priced in to everything a lender does with a customer; it contributes to reduced access or increased costs. Just the fact that this relatively small survey of 2000 executives is being heralded as ground breaking says something about the amount of real data we have on these firms. Could you imagine if Wall Street analysts were giving guidance on a particular company based just on opinion surveys of their top executives? I doubt that would fly with most investors.

Providing more rigorous data around SMB’s is part of WAIN Street’s core mission. Good data leads to a better understanding of risk and increased confidence in lender assessments of that risk. And I’d guess that lender confidence is probably a good thing for SMB’s when they’re out looking for cash…