cit: voice of the middle market

1cit.com/middlemarketoutlook

CIT’s 2014 Voice of the Middle MarketTM study

examines the perspectives of U.S. middle market

executives on the U.S. economy, the availability

of financing and the health of their companies.

This year’s study also assessed respondents’

perspectives on the upcoming 2014 mid-term

elections and 2016 presidential election.

Results from the 2014 CIT: Voice of the Middle

Market study show that the economic outlook

of senior middle market executives is trending

upwards, as compared to opinions from 2013.

Middle market executives are favorable about the

state of their own companies, with many describing

it as strong. Few say they are worse off today as

compared to a year ago. In fact, more than 60% of

executives report being in a stronger position today

than a year ago. This assessment is most evident

among middle market executives representing

companies with annual revenues between $100

million and $1 billion.

The executives surveyed are also fairly positive

about their local economy; 51% rate it as strong and

just 17% say it is weak. Their assessments of the U.S.

and global economies continue to lag behind their

view of their local markets, but there is a clear shift

in negative views of the state of the U.S. and global

economies since last year’s study. This year, middle

market executives are split about the U.S. economy:

27% describe it as strong, 30% say it is weak and

the rest characterize it as neutral. In comparison,

41% of middle market executives described the U.S.

economy as weak in 2013 and only 15% said it was

strong.

While middle market companies are confident

about their own companies, they are not without

concerns about the year ahead. Their top

concerns are continued economic uncertainty and

compliance with the Affordable Care Act, with

three-fourths citing these as concerns. These are

followed by worries related to tax increases and

regulations. As with last year, talent management is

top of mind as well: 68% are concerned about the

ability to retain top talent and 65% are concerned

CIT: Voice of the Middle MarketTM

Perspectives from the Heart of the U.S. Economy

Better WorseNo change/the same

63% 64%

71%

53%

34%

27%23%

13%

28%

9% 9% 6%

Total Low Revenue($25 Million -$50 Million)

Middle Revenue($50 Million -$100 Million)

High Revenue($100 Million -

$1 Billion)

BETTER OFF TODAY THAN A YEAR AGO

Numbers may not sum to 100 because of rounding.

2


cit.com/middlemarketoutlook

about the ability to hire top talent. The vast majority

of middle market executives also say they are

concerned with data security challenges in the

coming year.

Eighteen percent say it is likely their company will

be sold in the next few years; however, selling is not

on the immediate horizon either. Rather, most who

say there is a chance their company will be sold

predict it will happen more than a year from now, at

a minimum. Family succession issues and operating

costs are among the top factors influencing a

possible sale.

MiddlE MarkEt WorkforcE in focUS

Most middle market executives participating in this

research have a workforce that includes more than

100 people, with 40% having a workforce of 500

or more. Self-reporting among this audience about

the size of their workforce in 2013 reveals that more

than half are at companies that have experienced

workforce growth over the past 12 months (55%).

Only a minority have experienced a decrease in the

size of their workforce over this time period (15%).

Another 30% describe their workforce size as the

same as in 2013, demonstrating both stability and

growth in the middle market.

Over the next year, many middle market executives

are forecasting an increase in the size of their

workforce. Overall, 62% say they expect the size of

their workforce to increase in the coming year, with

most of this group saying that their workforce will

increase by no more than 10%. This growth forecast

is consistent across revenue categories. One in 10

is predicting that the size of the workforce at their

company will decrease.

2013

Local Economy

US Economy

Global Economy

Local Economy

US Economy

Global Economy

2014

WeakNeutralStrong

27%

51% 32% 17%

43% 30%

50% 36%14%

36% 39% 25%

15% 45% 41%

7% 43% 50%

INCREASED OpTIMISM ON STATE OF THE ECONOMY

Increase by 11-15%

Increase by more than 15%

Increase by 6-10%

Decrease

Stay the same

Increase by no more than 5%

9%

28%

28%

6%

8%

20%

INCREASE IN HIRING ON THE HORIzON

Somewhat ConcernedVery Concerned

Rising Interest Rates

Rising Inflation Rate

Access to Capital

Continued EconomicUncertainty

19%

14%

35%

30%

Cost of Capital 20% 31% 50%

54%

18% 41% 59%

44%

Ability to Hire Top Talent

Data Security 30%

28%

37%

37% 65%

67%

31% 45% 76%

Ability to RetainTop Talent

Tax Increases

Regulations

Costs Associatedwith the ACA

Compliance withRegulations

34% 75%42%

37%

36%

71%

70%

34%

34%

34%

32% 30% 61%

34% 68%

TOp ISSUES OF CONCERN OVER THE NEXT 12 MONTHS

3



Business demand and opportunities is a primary

variable influencing workforce growth among

those who say they anticipate an increase in their

workforce.

PErcEPtionS of tHE lEnding EnvironMEnt

On the whole, middle market executives are satisfied

with their financing options. Nine in 10 are satisfied

with their company’s access to financing, up almost

10 points from 2013. There is widespread satisfaction

with the cost of financing and financing alternatives

available as well. Importantly, nearly all of those

surveyed say they are happy with their current

financial lender.

When asked what their financial lender could do

better or differently to help their company succeed,

the top suggestions were to focus on rates and

costs, specifically lower interest rates and lower fees.

Feedback on simplifying processes and improving

customer service falls into a second tier.

WaSHington and tHE MiddlE MarkEt

There is widespread dissatisfaction among middle

market executives about our elected officials. Two-

thirds say they disapprove of president Obama’s

job performance, which is consistent with opinions

from 2013. Congress fares even worse: 84% say

they disapprove of Congress’s job performance, an

improvement over 2013 when 95% disapproved. This

general dissatisfaction is also evident when asked

to assess Congress’s attentiveness to businesses of

different sizes. The vast majority believe Congress

is doing too little to support both small and middle

market businesses. In contrast, only 34% hold this

view about big businesses.

Looking ahead to the upcoming elections this

November, the majority say a Republican-controlled

Company’s Costof Financing

65%18% 83%

Current FinancialLender 69%25% 94%

Company’s Access toFinancing

69%21% 90%

Variety of FinancingAlternatives Available 62%23% 85%

AgreeStrongly Agee

SATISFACTION WITH CURRENT FINANCING

Big Businesses 22%34% 45%

Small Businesses 9%86% 5%

Middle MarketBusinesses 17%77% 6%

Too MuchToo Little Sufficient

MANY VIEW CONGRESSIONAL SUppORT LACkING

International Expansion 20%

Increase BusinessDemand/Opportunities

58%

New Product Launch 23%

Need to Innovate to StayAhead in the Industry

32%

Expansion to anAdjacent Market

40%

NEW HIRING NEEDED TO ACCOMMODATE FUTURE GROWTH

Responses include those who expect to increase their workforce

over the next 12 months (n=188).

4



Congress would be good for their company (55%),

with only one in five thinking a Democrat-controlled

Congress would be better for their company (21%).

The rest are divided between saying split control

would be preferable or that the party in the majority

in Congress does not impact their company (13% and

10%, respectively).

The middle market is expecting the next session

of Congress to take up a diverse agenda, with tax

reform topping the list. Additionally, three-fourths

want changes to healthcare reform, investments

in infrastructure and increasing domestic energy

production to be on the agenda for the next session

of Congress. Regulatory, immigration and tort reform

are also important. Fewer think raising the federal

minimum wage should be taken up by the 114th

Congress.

Thinking further into the future, when asked about

the 2016 presidential election, just over half would

like the next president to be a Republican (54%).

Three in 10 are hoping to have another Democrat

in office, while the remaining 16% say they do not

know. Reflecting on specific candidates, the three

most popular Republican candidates are New Jersey

Governor Chris Christie, former Florida Governor

Jeb Bush and the 2012 Republican nominee, former

Massachusetts Governor Mitt Romney. On the

Democratic side, former Secretary of State Hillary

Clinton generates the greatest support. New York

Governor Andrew Cuomo falls into a second tier,

receiving less than half as much support as Clinton.

All the other possible Republican and Democratic

candidates receive less than 10% support from

middle market executives.

MEtHodology

kRC Research conducted an online survey among

301 middle market executives in the United States

in August 2014. (Note: For the purposes of this

research, the middle market is defined as companies

with revenue between $25 million and $1 billion.)

aboUt cit

Founded in 1908, CIT (NYSE: CIT) is a financial

holding company with approximately $35 billion in

financing and leasing assets. It provides financing,

leasing and advisory services to its clients and their

customers across more than 30 industries. CIT

maintains leadership positions in middle market

lending, factoring, retail and equipment finance,

as well as aerospace, equipment and rail leasing.

CIT’s U.S. bank subsidiary CIT Bank (Member FDIC),

BankOnCIT.com, offers a variety of savings options

designed to help customers achieve their financial

goals.

For more information, please visit:


Somewhat ImportantVery Important

Increasing DomesticEnergy Production

Tort Reform

Raising the FederalMinimum Wage

Changes toHealthcare Reform

30% 77%48%

Tax Reform 41% 84%44%

40% 76%37%

Investments inInfrastructure

Regulatory Reform

33% 43% 76%

31% 43% 73%

21% 41% 62%

21% 20% 40%

Immigration Reform 37% 30% 66%

IMpORTANCE OF CONGRESSIONAL ACTION ON kEY ISSUES