The National Center for the Middle Market recently published the results of a survey of 1,000 financial decision-makers in June 2020 relating to results from the fourth quarter of 2019 and a March 2020 survey of 260 middle market companies, which include companies with annual revenues between $10 million and $1 billion.
The survey found that middle market companies were operating at 67% capacity. Only 13% of middle market executives believed that COVID-19 would have significant negative impacts on their businesses, compared to 25% in March 2020. As time passed, concern declined. Revenue levels and realizing projections remain among the principal concerns for 23% of executives, compared to 43% of executives in March 2020. Concern relating to making payroll was the main concern for 32% of middle market leaders in March 2020, but this declined to 12% in June 2020.
The survey also indicates that middle market executives project slower revenue growth compared to 2019. In June 2020 executives projected an average 12-month revenue growth rate of about 2.0% for the next year. Employment growth was also projected to decline by 0.2% compared to a 3.5% employment growth rate in the fourth quarter of 2019. Sentiment surrounding growth and expansion has seemingly turned around. In March 2020, 70% of executives indicated pulling back on growth initiatives, including expanding into new markets, and 66% noted a delay in capital expenditures for 12 months. The June 2020 results showed 37% of executives are prepared to enter new markets and 13% expect to build new facilities, all within the next 12 months. General uncertainty remains a challenge for the middle market, but as executives learn to adapt to changing conditions, more emphasis is placed on other facets of running a business. For example, maintaining employee communication, engagement, and productivity were reported as the most difficult aspects of running a business in June 2020 (59% of respondents) compared to March 2020 (49%).
Over half of the surveyed middle market companies applied for, and received, government and private sector financing. The payment protection program (PPP) was the largest source of funding, about 33% sought PPP loans, and 25% received PPP loans. For smaller companies, the PPP was an even more important source of financing, with 31% of businesses receiving relief. Executives also predict that their companies will take more time to return to full capacity and 8/10 middle market leaders reported that their companies will likely make long-lasting operational changes due to the pandemic.