What is lower middle market vs middle market?
Lower middle market vs middle market explained: how sources define each by revenue and enterprise value, the cutoffs they use, and how lenders size deals.
The lower middle market is the smaller end of the middle market, so the two terms describe a size band and the part of that band inside it, not two separate markets. Sources disagree on the cutoffs because they measure size by annual revenue or by enterprise value. Thrive Funding arranges private credit for middle-market companies, so we see these size bands in borrower requests; we did not set the definitions, and we are not a lender.
At a glance
| Point | Lower middle market | Middle market overall |
|---|---|---|
| Annual revenue, Persient | $10 to $50 million (Persient) | $50 to $500 million (Persient) |
| Annual revenue, CFI | $5 to $50 million (Corporate Finance Institute) | Not split by CFI |
| Annual revenue, Middle Market Center | Not split | $10 million to $1 billion (Middle Market Center) |
| Enterprise value, Capstone | $10 to $250 million (Capstone Partners) | $10 million to $1 billion (Capstone Partners) |
| Share of middle-market companies | More than 90% (Corporate Finance Institute) | 100% of the group |
| Total companies in the U.S. | Not given | About 200,000, about 3% of all U.S. companies (Middle Market Center) |
| Typical ownership | Often founder-led or family-owned (Carta) | Mostly privately held (Middle Market Center) |
| Financing | Asset-based lending common (Corporate Finance Institute) | Wide range of structures |
Why the definitions differ
There is no single legal or regulatory definition of the middle market. Each source picks a measure, then sets cutoffs for it. Some use annual revenue, such as Persient and the Middle Market Center. Others use enterprise value, which is the price a buyer would pay for the whole business, as Capstone Partners does. Investopedia describes the lower middle market by valuation, roughly $10 million to $100 million.
That is why the same company can sit in the lower middle market under one source and in the middle market under another. Before you compare a deal to a benchmark, check which measure and which cutoffs the source uses.
How big is the lower middle market?
The lower middle market is the largest part of the middle market by company count. Corporate Finance Institute says it is usually the largest segment in most economies and represents more than 90% of all middle-market companies (Corporate Finance Institute). Most of the companies a lender meets in this band are therefore small compared with the upper end of the middle market.
The band also sits just above small and medium enterprises. Corporate Finance Institute places it above firms with revenue under $5 million (Corporate Finance Institute).
How is the whole middle market measured?
The broader middle market is usually defined by annual revenue between $10 million and $1 billion, according to the Middle Market Center (Middle Market Center). The same source estimates about 200,000 middle-market companies, or about 3% of all U.S. companies. Capstone Partners uses enterprise value instead and reaches a similar $10 million to $1 billion range (Capstone Partners).
The overall band is wide. A company at $12 million in revenue and one at $900 million are both middle-market firms, yet they buy different services and borrow in different ways.
How does financing differ between the two?
Size drives lender choice. Thrive Funding takes applications from middle-market companies seeking $1 million to $100 million or more in private credit. Each application is matched against each lending group's criteria, including deal size, revenue and EBITDA minimums, industries, states, loan types and pricing. A smaller company therefore usually reaches a different set of lenders than a larger one.
Asset-based lending is one example of how structure changes with size. Corporate Finance Institute notes that asset lenders typically advance about 60% against inventory and 85% against accounts receivable (Corporate Finance Institute). Those advance rates are a general pattern cited by that source, not a quote for any specific loan.
Which to choose
You do not choose between the two terms; you choose the definition that matches your question. If you are sizing a deal, check the revenue or enterprise value cutoffs the buyer, lender or source uses. If you are looking for lending, state your annual revenue, EBITDA and requested loan size, because lenders screen on those figures. Thrive Funding is a fit for middle-market borrowers who want one application matched to lenders. If your need is under $1 million, a direct lender or a bank may be the better first call, since our form declines requests under that amount.
Sources
Frequently asked questions
What is the difference between middle market and lower middle market?
The lower middle market is the smaller part of the middle market. Persient puts it at $10 million to $50 million in annual revenue and the middle market at $50 million to $500 million (Persient). Other sources use wider or different cutoffs.
What is considered a lower middle market company?
It depends on the measure. Corporate Finance Institute uses $5 million to $50 million in annual revenue (Corporate Finance Institute). Capstone Partners uses $10 million to $250 million in enterprise value (Capstone Partners).
What does middle market mean?
The middle market is the group of businesses between small companies and the largest public firms. The Middle Market Center defines it mainly by annual revenue between $10 million and $1 billion (Middle Market Center).
What is middle market financing?
Middle market financing is private credit provided to middle-market companies. Thrive Funding arranges it for borrowers seeking $1 million to $100 million or more, but the lender makes every credit decision.
Chris Irving
Co-Founder @ Thrive
Arranges middle market financing with private credit funds, asset-based lenders and other lending partners.
