Access to better capital drives the mid-market.

• Author: Quindlen, Tom
• Position: Financing

The middle market is the great unheralded driver of the United States economy. These businesses--with anywhere from $10 million to $1 billion in revenue--employ 34 percent of the U.S. private sector workforce and in 2010 contributed $3.8 trillion to the nation's gross domestic product. The U.S. middle market would be, by itself, the fourth-largest economy in the world, just behind Japan.

Yet, as impressive as these numbers are and as diverse as this group is, the middle market is too often ignored and overshadowed. On the top end, huge multinationals leverage their size and global name recognition to influence policymakers. On the lower end of the spectrum, small businesses have established themselves as the embodiment of intrepid American entrepreneurialism.

But the middle market's disadvantage goes beyond a lack of attention. Access to capital has also been a problem since the financial crisis, as many lenders to the middle market either exited the business or dissolved. Today, global banks fight to serve the big multinationals, while the Small Business Administration helps promote and develop small businesses. The result is a financing gap for the middle market.

A recent survey by GE Capital and The Ohio State University's Fisher College of Business found that 55 percent of middle market businesses do not have sufficient access to capital. Addressing this financing void can have a direct impact on the country's economic growth and job creation. Consider that during the recent downturn, middle market companies still managed to add two million jobs while large companies shed four million jobs.

As General Electric Co.'s Chief Executive Officer Jeffrey Immelt expressed in his keynote address at the 2011 National Middle Market Summit: "job creation by and large has come from growth companies going through the $10 million revenue barrier up to $1 billion and beyond."

Optimism and Opportunities

To better understand the middle market, the GE Capital/Ohio State study surveyed more than 2,000 chief executives and chief financial officers in private and public businesses. The results were eye-opening. There are 194,000 such businesses in the U.S. and it's a segment characterized as a diverse group in terms of geography, industry and size.

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In terms of size, there are three sub-segments of the middle market each with distinct operational and financial characteristics:

* Businesses with revenues of $10 million to $50 million often operate more like small companies. They are typically privately held (94 percent), with a large percentage family owned and operated.

* Businesses with $50 million to $100 million in revenue are three times more likely to be publicly listed than smaller firms. They also have more mature business practices. Most set formal annual...