The U.S. economy has been showing signs of strength in recent months, with the employment situation being one of the driving forces behind growth.
As economic momentum accelerates, small- and mediums-sized manufacturers and wholesalers can begin to see orders larger than usually handled. As a result, financial assistance may be needed, and without help from a traditional bank, these companies can turn to purchase order financing.
August proved to be another strong month for the jobs market, with the private sector adding 176,000 new positions, according to the ADP National Employment Report. Medium businesses led the way, creating 74,000 jobs, followed closely by small businesses at 71,000 positions. Meanwhile, large companies generated 32,000 jobs. The services-providing sector continued to dominate job growth, and all five industries posted gains.
"It is steady as she goes in the job market," said Mark Zandi, chief economist at Moody's Analytics. "Job gains in August were consistent with increases experienced over the past two-plus years. There is little evidence that fiscal austerity and Health Care Reform have had a significant impact on the job market."
Initial jobless claims fall to pre-recession level
Another positive sign for the jobs market was the fact that first-time unemployment benefits applications declined more than forecast in the final week of August.
Jobless claims dropped by 9,000 to 323,000 in the week ending August 31, according to the U.S. Department of Labor. Economists surveyed by Bloomberg called for 330,000 claims. The four-week moving average was 328,500, down by 3,000 from the previous week.
"We are seeing significant improvement in claims," Yelena Shulyatyeva, economist at BNP Paribas, told Bloomberg. "What we need to see is more progress on the hiring side."
Part of the reason claims have been becoming less frequent is that employers are pulling back on firings, potentially leading to a pick up in hiring in the coming months as the impact of federal budget cuts and higher payroll taxes begins to wear off.
Purchase order financing market could receive boost from strong economy
When the economy picks up steam, business across various industries tends to follow suit. As a result, small- and medium-sized manufacturers and wholesalers may begin to see larger orders.
However, companies aren't always able to fund such orders on their own dime. At first, a manufacturer or wholesaler may turn to a traditional bank, but smaller businesses are often turned away due to limited available capital or poor credit.
Fortunately, purchase order financing is available to provide assistance. This type of lending agreement allows businesses to obtain up to 100 percent of the funds needed to fill an order.
Purchase order financing comes with two major benefits. For one, manufacturers and wholesalers are able to do business with big-box retailers, such as Target and Walmart, without tying up too much available capital.
Additionally, being able to obtain all the funds needed to fill an order makes it possible to grow without having to sell any equity to financiers.