Published On: June 26, 2025 | Last Updated: December 31, 2025
Middle market companies are a critical engine of economic growth. Typically generating annual revenues between $10 million and $1 billion, these businesses operate at a level of scale that demands sophisticated capital solutions. They are often established, operationally complex, and actively pursuing growth through expansion, acquisitions, or balance sheet optimization.
Despite their scale, many middle market companies encounter a persistent financing gap driven by operating complexity, working capital intensity, and limited access to efficient institutional capital. Traditional small business lending lacks the capacity and flexibility they require, while institutional capital markets and syndicated debt structures are often inefficient or inaccessible. This gap is where middle market business loans, particularly accounts receivable–driven and asset-based lending structures, play a critical role in supporting liquidity, growth, and execution certainty.
In this blog, we explain how middle market financing works, why AR-based lending dominates this segment, and how CFOs and CEOs can evaluate the right capital structure to support growth, liquidity, and execution certainty.
What Are Middle Market Companies?
Middle market companies sit between entrepreneurial businesses and large corporates. These organizations typically have:
- Predictable revenue streams
- Established customer relationships
- Professional management teams
- Ongoing capital requirements tied to growth or operating scale
They operate across sectors such as manufacturing, distribution, logistics, staffing, and B2B services, industries where working capital intensity is high and receivable cycles directly impact liquidity.
What differentiates middle market firms is not revenue size alone, but the mismatch between operating complexity and access to flexible, scalable capital. They often lack access to public markets yet require more advanced financing than conventional term loans can provide. As a result, middle market companies rely on structured lending solutions anchored to receivables and operating assets, rather than purely cash-flow-based credit.
Mid Market Business Loans
Middle market loans are designed to align capital availability with the operating realities of mid-sized enterprises. Unlike standardized commercial loans, these facilities are structured, monitored, and adjusted based on real-time business performance.
The most effective middle market financing solutions are typically anchored to accounts receivable, sometimes combined with inventory or other short-term assets. This approach allows companies to:
- Convert earned revenue into immediate liquidity.
- Scale borrowing capacity alongside sales growth.
- Reduce reliance on long-term leverage for short-term needs.
Lenders serving the middle market prioritize collateral quality, customer diversification, billing discipline, and cash conversion efficiency, rather than relying primarily on historical EBITDA or static leverage metrics. For CFOs, this type of financing provides liquidity without diluting ownership or overleveraging the balance sheet.
Core Financing Structures Used in the Middle Market
Rather than a wide mix of generic loan products, middle market borrowing is typically concentrated around a few highly effective structures.
1. Accounts Receivable Financing
Accounts receivable financing allows companies to unlock capital tied up in unpaid invoices. Borrowing availability is directly linked to eligible receivables, providing a dynamic source of liquidity that grows with revenue.
This structure is particularly effective for businesses with:
- Long customer payment terms
- Concentrated working capital needs
- Strong creditworthy customer bases
AR financing improves cash flow predictability and reduces dependency on internal reserves.
2. AR-Anchored Asset-Based Lending (ABL)
AR-based ABL facilities expand on receivables financing by incorporating additional assets, such as inventory or select equipment, to increase borrowing capacity.
These facilities are commonly used by middle market companies undergoing:
- Rapid growth
- Seasonal working capital swings
- Operational restructuring
ABL provides scalable liquidity with disciplined risk controls, making it a preferred solution for companies seeking flexibility without excessive covenant constraints.
4. Selective Bridge Financing
Bridge loans serve a specific role in middle market capital structures. They are short-term solutions designed to address timing gaps, such as:
- Acquisition closings
- Refinancing transitions
- Temporary liquidity constraints
In the middle market, bridge financing is most effective when paired with a clear exit strategy, often through AR-based refinancing or longer-term structured facilities.
Benefits of Middle Market Loans
For mid-sized enterprises, accounts receivable is often the largest and most underutilized asset on the balance sheet. AR-based financing offers several advantages:
Liquidity Aligned With Revenue: Borrowing capacity increases as receivables grow, allowing liquidity to scale naturally with sales performance. This structure supports growth without the need for repeated refinancing or fixed debt expansions.
Faster Access to Capital: AR-based facilities are underwritten against existing receivables, enabling quicker deployment of capital compared to traditional term loans that rely heavily on historical cash flow and lengthy credit approvals.
No Equity Dilution: Companies raise working capital without giving up ownership or control. This preserves governance and strategic flexibility, which is critical for management teams executing long-term growth plans.
Improved Cash Conversion Efficiency: AR financing shortens the gap between invoicing and cash availability, strengthening liquidity management and reducing reliance on internal reserves to fund payroll, inventory, and operating expenses.
Adaptive to Operating Realities: Compared to fixed term loans, AR-driven middle market financing adjusts to customer payment behavior, seasonality, and revenue volatility, making it well suited for CFOs focused on working capital optimization rather than headline leverage.
How the Middle Market Loan Process Works
While more structured than small business lending, the middle market lending process is designed to balance speed, transparency, and disciplined underwriting. The objective is not simply to extend credit, but to align liquidity with the company’s operating cycle, asset quality, and growth strategy.
Strategic Assessment
The process begins with a strategic evaluation of the company’s capital objectives and operating profile. Lenders assess receivables quality, customer credit strength, concentration exposure, and revenue predictability to determine whether an AR-anchored facility supports the company’s liquidity and growth strategy.
Financial and Collateral Review
Lenders perform an in-depth review of financial statements, accounts receivable aging, customer concentration, and cash flow performance. Equal emphasis is placed on billing accuracy, collections discipline, and dispute management to validate the reliability of receivables as a primary collateral base.
Facility Structuring
Using the collateral analysis, the facility is structured around borrowing base mechanics, advance rates, reporting requirements, and covenant thresholds. The objective is to deliver scalable liquidity that grows with revenue while maintaining appropriate controls aligned with middle market risk standards.
Due Diligence and Approval
Formal due diligence includes receivables verification, legal and documentation review, and confirmation of operational systems. This step ensures transparency, validates asset integrity, and confirms the company’s ability to meet ongoing reporting and compliance expectations.
Funding and Ongoing Monitoring
Upon closing, capital is deployed through a revolving or structured facility. Ongoing monitoring includes periodic financial reporting and borrowing base reviews, ensuring liquidity remains aligned with operating performance and enabling timely adjustments as the business scales.
For experienced management teams, once reporting, controls, and lender alignment are in place, financing becomes predictable and scalable. Borrowing capacity adjusts with receivables, allowing companies to fund growth and manage working capital efficiently without renegotiating facilities, turning lending into a repeatable part of the capital strategy.
How EPOCH Financial Helps Middle Market Companies
Middle market financing requires more than capital. It requires precision, speed, and an understanding of how businesses actually operate.
EPOCH Financial specializes in accounts receivable financing, AR-anchored asset-based lending, and selective bridge solutions for middle market companies with complex operating and working capital requirements. We work closely with CFOs and executive teams to structure facilities that improve liquidity without constraining growth.
Our approach is disciplined, transparent, and relationship-driven. We focus on capital structures that support execution, strengthen cash flow, and evolve alongside the business.
For middle market companies seeking practical, scalable financing backed by expertise, EPOCH Financial delivers solutions built for performance and long-term value.
