Following the Federal Open Market Committee meeting held September 15-16, TSL Express sat down with Jon Biorkman, head, U.S. Specialty Finance, BMO Commercial Bank, to discuss the interest rate increase, how companies are managing liquidity, M&A growth and more.

Looking beyond the recent rate decision, what economic or business indicators will you be watching most closely when assessing middle-market borrowers over the coming year?

We are focused on the underlying health of our clients' and prospects’ businesses. Areas of particular interest include customer demand, working capital performance, and the ability to manage input cost pressures. We are also watching factors that increasingly influence credit quality, including supply chain resilience, tariff exposure, pricing power, and capital investment trends. 

Overall, middle-market companies have demonstrated considerable resilience over the past several years. The businesses that have been most resilient are those that maintain strong liquidity, adapt quickly to changing conditions, and invest through economic cycles.

How are companies managing liquidity in an uncertain rate environment?
Companies continue to prioritize flexibility above all else. From a financing perspective, borrowers increasingly value facilities that can scale with their business and adjust as working capital needs evolve. Asset-based lending remains particularly attractive because availability naturally grows or contracts with the underlying asset base, providing companies with dependable liquidity while preserving financial flexibility through changing market conditions.

What does flexibility look like in practice today?

Flexibility means different things depending on the company, but the common theme is preserving optionality. Borrowers want financing solutions that can support organic growth, acquisitions, seasonal working capital swings, supply chain adjustments, and periods of market volatility. These are not new discussion points, but the conversations have become more granular. Borrowers are spending more time evaluating collateral eligibility, advance rates, availability triggers, and the ability to scale facilities alongside growth initiatives or acquisitions.  

What are some general trends in working capital management and financing demand?
Companies are analyzing every element of the cash conversion cycle, with heightened attention on inventory management, collections, and supplier terms. Additionally, efforts to diversify supply chains and reduce dependence on single-source vendors are often creating incremental working capital requirements, supporting continued demand for flexible financing solutions.  

What about M&A and growth activity among middle-market firms?
We continue to see healthy demand from both private equity sponsors and strategics. At the same time, companies are balancing offensive and defensive priorities, investing in organic growth and operational improvements while maintaining a heightened focus on liquidity, financial flexibility, and access to scalable capital.

We also see companies evaluating financing decisions through the lens of speed, certainty of execution, and the ability to adapt as business conditions evolve. The premium placed on flexibility reflects a desire to remain offensive when opportunities arise while maintaining resilience if conditions become more challenging.

How much are higher-for-longer rates changing borrowers' behavior around working capital?

Any further increase in interest rates puts additional focus on working capital efficiency. Companies are paying closer attention to every component of the cash conversion cycle, including inventory management, collections, receivables quality, and supplier terms. We are also seeing borrowers take a more rigorous approach to evaluating their customer base, balancing volume, margin, payment terms, and overall profitability. The objective is not simply to increase sales, but to maximize the return generated on each dollar of working capital invested.

What does "healthy M&A demand" look like from your seat? Are you seeing more add-ons, larger platform acquisitions, sponsor-backed transactions or strategic acquisitions?

Active mandates for BMO’s Middle Market M&A group reached an all-time high in June 2026, up approximately 25% from a year ago. We continue to see strong demand from both financial sponsors and strategic buyers, supported by stable financing markets and improved confidence around transaction execution.

Among sponsors, we see activity in both new platform investments and add-on acquisitions. Sponsors remain highly motivated to deploy capital, create value, and ultimately generate realizations for investors. At the same time, many strategics are actively pursuing acquisitions to enhance capabilities, enter adjacent markets, and accelerate growth.

If rates move higher again, what changes do you expect to see in how middle-market companies manage liquidity over the next 6–12 months?

Companies would likely become even more deliberate in balancing liquidity, flexibility, and overall cost of capital. We already see borrowers maintaining larger liquidity cushions and placing a premium on access to committed capital, but they are also looking more closely at capital structure efficiency. One trend we're watching is a growing willingness among companies to consider split-lien structures. For borrowers that have traditionally relied on enterprise value-based financing, combining an ABL revolver with a term loan can often provide additional liquidity while reducing the overall cost of capital.