As the U.S. economy continues to grow, activity at businesses across the country may pick up, potentially leading to movement in the purchase order financing market.
When economic growth accelerates, small- and medium-sized manufacturers and wholesalers can start to see orders larger than those that are usually handled. As a result, financial assistance may be needed, which is where purchase order financing can come in handy.
It appears as though the economy is still headed in the right direction, as The Conference Board Leading Economic Index increased 0.6 percent in July to 96, following no change in June and a slight bump in May.
"Following moderate growth in the last few months, the U.S. LEI picked up in July, with widespread gains among its components," said Ataman Ozyildirim, economist at The Conference Board. "The pace of the LEI's growth over the last six months has nearly doubled, pointing to a gradually strengthening expansion through the end of the year."
At the beginning of the year, many experts feared fiscal headwinds would slow the economic recovery, but that hasn't been the case. One of the biggest positives has been the jobs market, which created 200,000 new private sector positions in July, according to the ADP National Employment Report.
Should the growth of the economy continue in the near future, small- and medium-sized manufacturers and wholesalers could reap the benefits. Potential game-changing orders from big-box retailers such as Target and Walmart may begin to come in. To be able to fill these orders, purchase order financing can be utilized as smaller companies often don't have the capital to do so on their own. This type of lending agreement allows business owners to avoid selling any equity in their company by providing up to 100 percent of the funds needed to complete an order.