As of February 2025, equipment finance firms are increasingly scrutinizing the resilience of middle market firms—typically defined as companies with annual revenues between $10 million and $1 billion—in the face of a prolonged and volatile business cycle. Recent data, including the alarming decline in free cash flow (FCF) yields for S&P 500 companies, as highlighted by Goldman Sachs’ research on February 21, 2025, raises critical questions about the financial health of these firms. This article explores how falling FCF metrics signal potential performance headwinds for middle market firms, the sustainability of their resilience, and the strategic opportunities this presents for equipment finance firms, particularly as these companies turn to debt to fund capital expenditures (CapEx).

The Current Business Cycle and Middle Market Resilience