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In the vast landscape of business and finance, middle-market companies have emerged as a beacon of opportunity for lenders seeking a balance between risk and reward. These companies, typically described as having annual revenues ranging from $10 million to $500 million, possess unique characteristics that make them particularly appealing to lenders. In this blog, we explore the key factors that contribute to the allure of middle-market companies for lenders. Plus, we examine how AXIS by AIO Logic can help middle-market lenders automate and optimize processes across the entire loan lifecycle.

Stable Growth Potential

Middle-market companies often exhibit a sweet spot in terms of growth potential. Unlike larger corporations that may have already reached maturity, middle-market companies are positioned for expansion. Their size allows for agility and responsiveness to market changes, providing a growth trajectory that can be attractive to lenders. With their dynamic nature and ability to pivot quickly, middle-market companies present an enticing opportunity for lenders to support and participate in their growth journey.

Thanks to the reporting and analytics features of AXIS by AIO Logic, lenders using our platform can always be aware of the level of return generated from each loan or group of loans. For example, a lender can view analytics related to all of their middle-market loans and see if those loans are generating a higher level of return than loans to larger companies. This can be very useful in helping them make future investment decisions.

Diverse Industry Presence

One of the appealing aspects of middle-market companies is their diversity across industries. From technology and manufacturing to healthcare and consumer goods, the middle market encompasses a wide range of sectors. This diversity is advantageous for lenders looking to build a well-balanced and resilient portfolio. A diverse portfolio helps protect lenders from economic downturns that may impact specific sectors while providing opportunities to capitalize on the growth of industries that are thriving.

For users of AXIS by AIO Logic, a great way to track which industries are performing the best at any given time is through our portfolio analytics. When creating a new loan, users will have the ability to assign an industry to the loan. This industry can then be used as a filter in the portfolio reporting and analytics, allowing lenders to gain valuable insights into how loans in that industry are performing.

Personalized Relationship-Based Lending

Unlike larger corporations that often interact with lenders through more transactional means, middle-market companies engage in relationship-based lending. This personalized approach involves building strong connections between lenders and borrowers. Lenders who take the time to understand the intricacies of a middle-market company’s operations, goals, and challenges can tailor financial solutions to meet their specific needs. Through this approach, lenders can become more than just providers of capital; they can become strategic allies invested in the success of the middle-market company.

When building AXIS by AIO Logic, we wanted to optimize the relationship between lender and borrower as much as we could. That’s why we included several features to help facilitate communication between the two sides, leading to a smoother relationship. These features include email and call integrations, collaboration features such as discussions and notes, and customer relationship functions that allow lenders to view the entire borrower relationship history in one place. Along with additional features that allow for smoother communication, AXIS plays an important role in keeping both parties on the same page.

Flexibility in Deal Structures

Middle-market companies often require customized financial solutions to address their unique circumstances. Unlike rigid lending structures that may be prevalent in larger markets, middle-market lending allows for greater flexibility in deal structures. Lenders can tailor loan terms, covenants, and repayment schedules to accommodate the specific needs and cash flow patterns of the middle-market borrower. The ability to craft bespoke lending solutions contributes to the appeal of middle-market lending for both lenders and borrowers.

For lenders who want to offer customized financial solutions to their borrowers, AXIS by AIO Logic is the perfect solution. That’s because AXIS has native handling for every commercial loan structure, including amortizing, revolving, ABL, delayed draw, interest only, and many more. When setting up a loan, lenders can choose the appropriate loan type and the set-up process will automatically be adjusted specifically to accommodate that type of loan. This makes setting up different loan types for different clients easier and much less time-consuming.

Less Regulatory Burden

Compared to large corporations, middle-market companies often face less regulatory scrutiny. While compliance with financial regulations is still essential, the regulatory burden is generally lighter for companies in the middle market. This allows lenders to navigate transactions with greater efficiency and flexibility, focusing on the merits of the business rather than being bogged down by extensive regulatory requirements. The reduced regulatory burden can lead to quicker decision-making processes and more streamlined lending transactions.

The workload of fulfilling compliance requirements can be drastically reduced when using AXIS by AIO Logic, thanks to our suite of compliance features. Once the required parameters have been set, AXIS automatically creates a compliance calendar, which includes requirements and due dates for each covenant. Additionally, AXIS enables compliance certificate submission and covenant tracking through the customer portal. This feature automatically aggregates covenants into a compliance certificate and allows the borrower to electronically sign the certificate. Along with additional compliance features, these features drastically simplify compliance monitoring.

Conclusion

Middle-market companies have become a focal point for lenders seeking a blend of stability, growth potential, and personalized relationships. Their diverse industry presence, coupled with the flexibility in deal structures and a reduced regulatory burden, creates an appealing landscape for lenders to navigate. As the middle market continues to thrive and evolve, the symbiotic relationship between lenders and middle-market companies is likely to deepen, offering a mutually beneficial partnership that fuels economic growth and prosperity. Lenders, recognizing the unique characteristics of the middle market, are increasingly drawn to these companies as valuable additions to their portfolios. If your firm is seeking to enter into or expand its presence in the middle market, feel free to contact us today to schedule an intro call and learn more about how AXIS by AIO Logic can benefit your firm!