Improving economy could lead to increased need for purchase order financing

The past month has proved to be a good one for the U.S. economy as multiple indicators are signaling positive growth. 

As the economy begins to grow at a faster rate, manufacturers and wholesalers could see additional business, which might increase the need for purchase order financing

One positive indicator for the economy is the rising gross domestic product. According to the latest estimate from the U.S. Department of Commerce, real GDP increased at an annual rate of 2.4 percent in the first quarter of 2013, an improvement from the 0.4 percent bump in real GDP seen in the final three months of 2012. 

U.S. employment situation improving despite small blip in late May
In addition to real GDP growth, the employment situation has been on the mend in the past couple months. 

Initial jobless claims were up slightly in the week ending May 25, according to the U.S. Department of Labor, but these numbers may have been skewed as the Memorial Day holiday weekend forced estimates to be reported by five states instead of actual numbers. 

"This week we had a bit of a pop, but we still are seeing gradual improvement in the labor market," Bricklin Dwyer, economist at BNP Paribas, told Bloomberg. "The problem hasn't really been from firing – it's been on the other side with a lack of hiring."

Overall, the labor market has been a positive for the economy in the past couple months. April saw 165,000 new positions added to the economy, which helped bring down the unemployment rate to 7.5 percent – a four year low.

"With an increase of 165,000 jobs in April, and following the significant upward revisions for February and March, the job market looks better than expected despite the sequester or issues like the rising cost of providing health care benefits," said Conference Board economist Kathy Bostjancic.

Rising home prices also contributing to accelerated economic growth
Homeowners saw the values of their homes rise markedly in the past couple months, which has also helped improve the overall economy. 

The Standard and Poor's/Case-Shiller Home Price Indices reported all three composites posted double-digit annual gains in the first quarter, with the 10- and 20-city composites increasing 10.3 percent and 10.9 percent, respectively, and the national composite jumping 10.2 percent. 

"Home prices in all 20 cities posted annual gains for the third month in a row," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. "Twelve of the 20 saw prices rise at double-digit annual growth. The National Index and the 10- and 20-City Composites posted their highest annual returns since 2006."

This was the largest gain posted by home prices in seven years, showing that the housing market has continued to provide a boost to the overall economy. 

Manufacturers and wholesalers may need to turn to purchase order financing as economy improves
With numerous indicators pointing toward accelerated economic growth in the future, small- to medium-sized manufacturers and wholesalers might have an increased need for purchase order financing. 

As the economy improves, these companies could see additional business in the near future. Should they receive any orders larger than the usually handle, they may need to turn to financing, as smaller companies tend to have limited available capital and resources. 

One available option could be purchase order financing, which allows small- to medium-sized businesses to take advantage of large, game-changing orders from big-box retailers.

This type of lending agreement enables these companies to receive 100 percent of the funds needed to fill an order. Without the ability to utilize this financing option, manufacturers and wholesalers could be forced to sell equity in their companies to fill an order.