Middle Market companies represent enormous opportunity for P2P & AltFin

Last week I wrote a piece around how the middle market struggles to find a fit with eInvoicing.

A recent study by HSBC Hidden Impact – The Vital Role of Mid-Market Enterprises found that in the U.S., middle market companies (defined as having annual sales between $50 million to $500 million)

  • Number 55,700, representing the largest number of any country in the world including China
  • Support 16.5 million jobs, including many high value positions in the professional services sector
  • Provide a massive $2.2 trillion economic impact, making these businesses a vital part of the US and global economy

HSBC reported that this segment is critical for policy and typically overlooked compared to their SME brethren, because they contribute more to GDP for each employee than smaller companies, export more, and invest significantly in R&D.

According to the report, in terms of industry, more than one-third of the American middle market segment are in the wholesale and retail sectors, followed by business services (legal, accounting, engineering and design) with 14,100, and manufacturing with 7,500.

So back to this area of working capital for the middle market. A couple observations:

  • Most of these firms may be more interested in securing revolving credit facilities than having their large buyers provider early pay options. Those options are nice for adhoc finance needs, but not for medium and long-term planning.
  • On the flip side, many of these middle market companies have not implemented invoice automation, supplier portals, and finance options themselves, and this is a market some banks like PNC and Commerce Bank are targeting.
  • As it relates to early pay, this is probably the segment that is being impacted by many of the different options out there – pcards, supply chain finance (maybe), dynamic discounting, invoice auctions, C2FO, etc. A looming issue appears to be large enterprises are requiring multiple platforms via supply chain finance, einvoicing and pcards to enable both self management and or early pay access. So imagine if one of these middle market companies wants to tap into 4 or 5 of their large buyers programs – it becomes a real management issue.

Still, this market is untapped and represents a huge opportunity. As HSBC stated, it’s this segment, and not the SMEs that is getting everyone’s’ focus with P2P lending options, that represents a massive impact on the economy.

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