Middle Market Lending Companies: A Borrower's Guide

Middle market lending companies are private lenders that provide loans to mid-sized businesses, usually companies too large for small-business loans and too small for a broadly syndicated bond or loan. They include private credit funds, direct lenders and business development companies. Most of them lend through senior debt, mezzanine debt, asset-based loans and acquisition financing.

What is middle market lending?

Middle market lending is credit provided to companies in the middle of the size range, measured by earnings or revenue. According to Golub Capital, a typical core middle market firm is about 31 years old on average, has between 50 and 500 employees, and has somewhere between $10 and $100 million in annual EBITDA. Lenders in this space generally write loans that are private, meaning they are not sold to the public bond or loan markets.

The category is large. Golub Capital reports that direct lending, the largest part of private credit, has more than $950 billion in assets across private drawdown funds and BDCs. Lord Abbett describes the private corporate lending market as roughly $1.7 trillion in assets.

Middle market financing vs. middle market loans

Middle market financing is the broader set of capital a mid-sized company can raise, such as a term loan, a revolving credit line, mezzanine debt or equity. A middle market loan is one specific instrument within that set, most often a senior secured term loan made by a private lender. Many deals combine more than one instrument, for example a senior loan with a smaller mezzanine tranche.

Loan type	What it usually funds	Typical lender
Senior debt	Growth, refinancing, general corporate needs	Private credit fund or direct lender
ABL (asset-based lending)	Working capital tied to receivables and inventory	Specialty lender
Mezzanine debt	Layered capital between senior debt and equity	Mezzanine fund or BDC
Acquisition financing	Buying another business	Private credit fund or direct lender

Lender criteria differ by the size of the borrower's earnings. Prospect Street separates lending into companies with EBITDA of less than $5 million up to $50 million, and companies with EBITDA from $50 million to over $150 million. A fund that lends to one band may not lend to the other, so the band a borrower falls in narrows the list of lenders quickly.

Examples of middle market companies

A middle market company is a business with mid-sized earnings and a real operating history. Examples include a regional manufacturer with several plants, a distributor serving multiple states, a healthcare services group with several clinics, or a software company with recurring revenue and an established customer base. Sponsor-backed companies, owned by private equity firms, are a common borrower type.

Size is the main test, but lenders also look at industry, geography and the reason for the loan. Lord Abbett notes that smaller companies, generally those with less than $100 million in annual earnings, have historically sourced capital from banks. Private lenders have filled much of that gap.

Which lending companies are the top middle market lenders?

Search results for this topic are dominated by large asset managers and private credit firms that publish their own strategy pages. Ranked lists of "top" firms are usually based on assets under management, and they measure size, not fit for a given borrower. A $50 million acquisition and a $5 million expansion loan may both be "middle market" but will rarely go to the same lender.

For a borrower, the useful comparison is criteria. Check each lender's minimum and maximum deal size, EBITDA or revenue floor, target industries, states, loan types and pricing. Saratoga Partners states that it has deployed over $2.4 billion to more than 120 portfolio companies since 2010, a useful example of how a lender's track record can be checked against its stated focus.

How middle market lending companies are chosen

Lenders choose deals by fit. A deal that matches a lender's size, sector and structure gets a serious look. A deal outside those limits is usually declined early, often without a full review.

How to apply through an arranger

Thrive Funding is a private credit arranger for middle-market companies, not a lender. Thrive Funding dba II Capital Partners LLC, based in Miami, FL, takes one application and matches it against lending groups in its network. Each matching group reviews an anonymous deal summary before any borrower details are shared.

The process runs in five steps:

1. The borrower applies at thrivefunding.com/apply with the deal size, financing need and financial profile.
2. Thrive compares the request against each lending group's criteria.
3. Groups whose criteria match receive an anonymous deal summary and reply yes or no.
4. Once the borrower agrees, up to three groups that said yes make introductions, best fit first. Each introduction is a separate email thread.
5. Lenders issue term sheets on their own letterhead. Thrive sends a side-by-side summary, and the borrower chooses one.

Thrive is paid by its lending partners. Its success fee is owed when a loan closes. Estimates from Thrive are called indicative terms. They are not a term sheet and not an offer. Requests below $1 million are declined automatically, and the site leads with $5 million and above, although the form accepts $1 million and above.

For questions, contact contact@thrivefunding.com or call +1 (305) 912-2096.

Sources

• Middle Market Direct Lending | White Paper
• Private Credit: Middle Market Direct Lending
• Middle-Market & Lower Middle-Market Lending
• Home - Saratoga Partners