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Middle-market cash cycles stretch as bigger buyers slow payments
RapidRatings says cash conversion cycles for firms with up to $750 million in revenue have lengthened by about 30 days, pressuring working capital across supply chains.
Middle-market companies are facing a growing working-capital squeeze as cash conversion cycles extend, driven by slower payments from larger customers and rising operating costs, according to an executive at financial analytics firm RapidRatings.
RapidRatings Executive Chairman James Gellert said companies with up to $750 million in revenue have seen their cash conversion cycles stretch by roughly 30 days over the past few years. He described a one-sided dynamic where larger buyers slow payments to preserve their own cash, while smaller suppliers still pay their vendors on faster timelines.
The strain is amplified for supply chain participants, because private companies make up about 75% of most large companies' supply chains, Gellert said. He added that a post-2022 macro backdrop of persistent inflation, elevated interest rates, higher labor costs, and tariff volatility has worsened financial pressure.
Gellert said the environment has contributed to rising leverage and shrinking interest coverage, with many private firms borrowing at floating rates that leave them exposed to rate moves. He also noted that private equity hold periods, historically around 4.5 years, have stretched to six or seven years in some sectors, pushing more deals toward M&A, restructurings, creditor negotiations for extensions or waivers, and in some cases bankruptcy.