Middle market companies are a major force in the economy, operating between small businesses and large corporations. They face specific opportunities and challenges that require tailored financial services. The comprehensive guide below explores how middle market banking works, highlighting types of middle market services and how to choose the best bank for your business needs.

What is a middle market bank?

Middle market banks are a type of commercial bank that serve businesses that are too large to be considered small businesses but not yet large enough to qualify as major corporations. Middle market companies have a considerable number of employees—typically upwards of 100 — and generate anywhere from $10 million to $1 billion in annual revenue. Middle market companies typically operate regionally, can be privately held or private equity-backed, and are often in a growth stage.

Middle market banking seeks to address the needs of these companies, which often include: 

• Larger credit lines
• Access to asset-based loans
• Debt and equity financing
• Growth capital
• Treasury management services 

Middle market vs. small business vs. corporate banking.

Because middle market businesses are at a critical junction in their growth, strategic banking services can significantly impact their ability to scale. Understanding the differences between middle market, small business, and corporate banking can help companies identify which financial institutions can best serve their needs.

Small business banking

Banking for small businesses often targets start-ups, sole proprietors, and newly formed businesses that require standard financial services to address and support their business needs. These banking relationships are frequently transactional and involve basic deposit accounts, lines of credit, and small business loans. The goal of small business banking is to help companies grow by building a solid financial foundation.

Middle market banking

In contrast, middle market banking is geared more toward companies actively growing larger and more profitable. Their needs include access to more substantial working capital, customized lending solutions, cash management services, and industry-specific solutions. This type of banking places greater emphasis on the relationship and partnership between banks and middle market businesses.

Corporate banking

Increasing profits, minimizing risk, and pleasing shareholders lie at the core of corporate banking. Banking for the largest corporations encompasses complex dealings, including global treasury management solutions, risk management, investment banking services, and structured finance. The relationship between corporations and their banks is often complex and relies on the collaboration of multiple teams.

Essential financial services that middle market banks offer.

Commercial banks tailor their services based on the region, industry, and specific needs of each organization. These banks maintain deep industry knowledge and strong client relationships, offering full services that include debt, equity, and mergers and acquisitions (M&A). Below, learn more about the mainstay financial services geared to the middle market.

Access to capital

Financing options for the middle market industries include the following: 

• Term loans
• Lines of credit
• Asset-based lending (including equipment financing)
• Cash-flow loans
• Senior debt
• Mezzanine financing 

These banks also often provide capital markets advisory services that can include M&A, along with equity and debt financing.

Treasury and cash management services

Middle market banks offer treasury and cash management services that help businesses optimize cash flow, manage liquidity, and handle day-to-day transactions efficiently. Payment processing and fraud prevention can also help companies streamline funds transfers while safeguarding their financial data and related assets.

Deposit services

Similar to your average consumer bank, middle market banking offers business checking, savings accounts, certificates of deposit (CDs), and escrow services. Additionally, sweep accounts enable companies to sweep any excess balances into interest-earning accounts and maximize their returns without losing liquidity.

Specialized banking solutions for key industries

Companies in specialty industries, such as aviation, healthcare, distribution, food and beverage, and warehousing, often require timely cash flow solutions. For example, fixed-base operators (FBOs) that offer airport services for pilots, passengers, and staff may need funding for fueling, aircraft servicing, parking, and employee comforts. Similarly, maintenance, repair, and operations (MROs) can tailor their funding to services that support machinery in industries like manufacturing, energy, and transportation.

Advantages and disadvantages of middle market banking.

Middle market banking provides commercial businesses with access to larger and more flexible funding, specialized financial guidance, industry-specific insights, and long-term strategic support. With these resources at hand, companies can continue to fuel growth and gain traction. The support provided by middle market banks can also help companies overcome obstacles that might previously have slowed or halted their progress.

However, these services come with more complex and lengthy underwriting processes and potentially higher costs for tailored services. For many middle market corporations, these drawbacks are minimal compared to the potential growth that middle market banking unlocks.

How to find the banking partner your business deserves.

To determine which bank is right for your business, you’ll need to first have a clear understanding of your business goals. Before you begin your search, take the time to define your objectives, organize your financial documents, conduct a business audit, and set realistic expectations.

Now that you’re ready to consider potential banking partners, it’s important to evaluate the below factors:

• Track record of success
• Service offerings
• Approach to finding a buyer
• Team and available resources
• Cultural fit and communication style
• Fee structure
• Business valuation process

The best bankers go beyond transactions, they build relationships. Look for bankers that treat your business like more than a number.

Navigate the middle market with confidence.

The middle market is full of opportunities to achieve growth at scale. Unlocking your company’s potential requires the strategic use of resources that only middle market bankers can provide. Connect with a Middle Market Relationship Manager today to learn more about our middle market banking products and services.