Middle Market Lending: What It Is and How to Get Funded
Middle market lending is private credit for mid-sized companies, usually with $10M to $100M+ in EBITDA or revenue. Here is how it works and how to apply.
Middle market lending is debt financing for mid-sized companies, usually from private credit funds and non-bank lenders rather than large banks. Borrowers use it for acquisitions, refinancing, recapitalizations and growth. Thrive Funding arranges this kind of financing by matching one application to lenders whose criteria fit the deal. Thrive is not the lender. The lender makes every credit decision.
What counts as the middle market
The middle market is not a fixed legal category. Lenders define it by company size, and the definitions differ. Two common ways to measure it are annual revenue and annual EBITDA (earnings before interest, taxes, depreciation and amortization).
According to Golub Capital, a typical core middle market firm is fairly mature, with 50 to 500 employees and somewhere between $10 and $100 million in annual EBITDA. The same source says the category includes approximately 200,000 companies across the U.S.
The lower middle market sits below that. Abacus Finance describes it as companies with roughly $10 million to $150 million in annual revenue.
The boundaries overlap. A lender may define its market by EBITDA, revenue, or both, and it may add industry and geography limits. That is why the same company can be a fit for one fund and outside another fund's box.
What middle market lending is
Middle market lending is loans made to these companies by lenders outside the traditional bank system. The main structures include:
- Senior debt: the first claim on company assets and cash flow, usually the cheapest debt in the stack.
- Asset-based lending (ABL): a loan sized against receivables, inventory or equipment.
- Mezzanine debt: subordinated debt, ranked below senior loans and usually priced higher.
- Acquisition financing: debt used to buy another business, often alongside equity from the buyer.
Many deals combine these. A unitranche loan, for example, blends senior and junior debt into one facility with one lender.
Why private lenders fill this space
Banks used to be the main source of credit for mid-sized firms. That has changed. Lord Abbett notes that smaller companies, generally those with less than $100 million in annual earnings, would historically have sourced capital from banks. Private lenders now compete for those borrowers.
The growth has been large. According to Golub Capital, direct lending now represents the largest component of private credit, with more than $950 billion in assets across private drawdown funds and BDCs. Abacus Finance reports that private credit has grown roughly five times since 2009, reaching $1.34 trillion by mid-2024.
Banks still lend to this market. The Federal Reserve found that, in the fourth quarter of 2018, mid-sized firms with revenue between $10 million and $250 million held $549 billion in credit facilities. The same Fed note says non-bank lenders are a significant substitute for traditional banks in this segment.
Middle market direct lending vs. other financing
The terms overlap, so it helps to separate them.
| Term | What it usually means | Typical lender |
|---|---|---|
| Middle market lending | Any debt for mid-sized companies | Banks, private funds, non-bank lenders |
| Middle market direct lending | Loans made directly by a fund to the borrower, without a bank or bond market in between | Private credit funds, BDCs |
| Middle market financing | Broad term for capital raised by a mid-sized company, including equity | Varies |
| Lower middle market lending | Debt for companies at the smaller end of the segment | Specialist lenders |
In direct lending, the fund itself negotiates and holds the loan. In broadly syndicated loans, a group of banks or institutions shares a much larger loan that is traded in a secondary market. Those deals are usually for larger companies than the core middle market.
What a borrower should prepare
Lenders look at a consistent set of facts. Before you apply, have these ready:
- Annual revenue and EBITDA for the last few years, plus the current year to date
- The amount you need and what it is for, such as an acquisition, refinancing or growth capital
- Industry, states of operation and any concentration risks
- Existing debt, including lenders, balances and maturities
- The collateral you can offer, such as receivables, inventory, equipment or real estate
Loan size matters. Thrive's form accepts requests from $1 million, and its site leads with deals of $5 million and up. Requests under $1 million get an automatic decline. Each application goes only to lending groups whose criteria fit its size.
How the process works at Thrive Funding
Thrive is a broker of private credit. It is paid by its lending partners, and every borrower email says so.
- Apply. You submit an application at thrivefunding.com/apply. It arrives as a lead.
- Match. Thrive compares the deal with each lending group's criteria: deal size, revenue and EBITDA minimums, industries, states, loan types and pricing.
- Anonymous check. Matching groups get an anonymous deal summary and reply yes or no on fit.
- Intros. Once you agree, up to three groups that said yes receive introductions, best fit first. Each intro is a separate email thread, so the groups do not see each other.
- Terms. Lenders issue term sheets on their own letterhead. Thrive sends you a side-by-side summary, and you choose one. Any estimate before that is labeled indicative terms. It is not a term sheet and not an offer.
Thrive does not give priority to a lender because it pays an access fee. Deals go by fit.
How to compare offers
Loan quotes are hard to compare when they are in different formats. Put every offer on the same grid:
- Total amount and how it splits between senior, junior or ABL tranches
- Pricing, including base rate, spread, fees and any floors
- Term and amortization, and when the loan matures
- Covenants and reporting requirements
- Prepayment terms and any make-whole or exit fees
- Conditions to close, and the lender's diligence timeline
A lower rate with tighter covenants can cost more over the life of the loan than a slightly higher rate with flexible terms.
Common mistakes
- Applying below the lender's floor. A deal that is too small for a fund's minimums will not get intros, no matter how strong it is.
- Mixing up the lender and the broker. The lender underwrites and funds the loan. Thrive arranges introductions and does not make credit decisions.
- Accepting an indicative estimate as a commitment. Only a lender's term sheet describes a real offer, and even that is subject to diligence.
- Skipping the fee discussion. Ask what fees are owed, when, and by whom.
Sources
Frequently asked questions
What is middle market lending?
Middle market lending is debt financing for mid-sized companies, typically provided by private credit funds and non-bank lenders. Loans may be senior debt, asset-based loans, mezzanine debt or acquisition financing. Thrive Funding arranges these loans for borrowers seeking $1 million to $100 million or more.
What is middle market direct lending?
Direct lending means a lender, usually a private fund, originates and holds the loan itself, without a bank or public bond market in between. Golub Capital describes direct lending as the largest component of private credit.
What is middle market financing?
Middle market financing is a broader term for the capital a mid-sized company raises. That can include debt, equity or both. When people search for it, they usually mean debt from private lenders.
What does middle market mean in banking?
In banking, the middle market usually refers to companies too large for small business lending but below the size of large corporate borrowers. Banks define it by revenue or credit size, and the cutoffs vary. The Federal Reserve has studied this segment using revenue between $10 million and $250 million as a reference point.
Chris Irving
Co-Founder @ Thrive
Arranges middle market financing with private credit funds, asset-based lenders and other lending partners.
