Middle-market companies with up to $750 million in revenue have seen their cash conversion cycles stretch by roughly 30 days over the past few years, according to RapidRatings Executive Chairman James Gellert. The financial analytics firm, which rates public and private companies across 27 industries in roughly 170 countries, said the widening gap reflects a one-sided dynamic: larger buyers are slowing payments to preserve their own cash, while smaller suppliers remain obligated to pay their own vendors on accelerated timelines.
The squeeze matters acutely for carriers, brokers, and shippers because private companies make up approximately 75% of most large companies' supply chains, Gellert said. As working-capital pressure mounts on those private firms, the resilience of the broader supply chain ecosystem deteriorates with it.
One-Sided Payment Dynamics
Those middle market companies have had cash conversion cycles, depending on the industry, gap out over the last few years almost a month.
Gellert said the dynamic reflects larger customers "basically been able to extend payments, generally speaking, because they're stronger." He added: "So many companies have had to be the shock absorbers in the market keeping those or having the erosion in their operating margins."
Floating-Rate Exposure and Margin Erosion
The deterioration has been compounded by a post-2022 macro environment marked by:
- Persistent inflation
- Elevated interest rates
- Higher labor costs
- Tariff volatility
Most private companies borrow at floating rates rather than issuing long-dated bonds, leaving them directly exposed to rate moves that public peers can partially hedge, according to the RapidRatings CEO. The result has been rising leverage, shrinking interest coverage ratios, and erosion in both operating and net margins across the middle market.
Private Equity Hold Periods Lengthen
Private equity exit timelines have also lengthened under these pressures. Gellert said average hold periods, historically around 4.5 years over the past decade, have extended to six or seven years depending on sector, as multiple compression — worsened for SaaS businesses by AI-driven valuation shifts — makes exits less attractive. That elongated hold period is pushing more PE-owned companies toward M&A, restructurings, creditor negotiations for extensions or waivers, and in some cases bankruptcy, he said.
| Metric | Data |
|---|---|
| Middle-market revenue ceiling | Up to $750 million |
| Cash conversion cycle stretch | ~30 days over past few years |
| Private companies' share of large-company supply chains | ~75% |
| Historical PE hold period | ~4.5 years over past decade |
| Current PE hold period | 6–7 years depending on sector |
| Industries rated by RapidRatings | 27 |
| Countries covered | ~170 |
Monitoring Private Suppliers
For supply chain managers, the firm's advice is to intensify financial health monitoring of private suppliers and treat transparency as a commercial lever. RapidRatings reaches out to private companies on behalf of clients to obtain financials directly, and the CEO noted that many private firms now proactively seek inclusion in that network. Key recommendations include:
- Intensify financial health monitoring of private suppliers
- Treat transparency as a commercial lever
- Proactively seek direct financials from private suppliers
"The stronger private companies are the ones who are going to capitalize on that the best," Gellert said, arguing that proactive financial disclosure by suppliers creates tangible commercial value with large buyers that are already conducting supply chain risk programs. The firm rates companies across all size tiers with no minimum revenue cutoff, using an algorithmic model designed to assess financial health, default risk, and future performance on a comparable basis regardless of whether a company is public or private or where it is domiciled globally.
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