Despite a few hiccups in the past month, economists have a brighter outlook for the future of the U.S. economy, which could lead to increased demand for purchase order financing.
As economic growth accelerates, business at small- and medium-sized manufacturers as well as wholesalers tends to follow suit. Without the ability to rely on bank loans for a variety of reasons, these businesses often turn to alternative forms of financing.
Nearly three-quarters of business economists surveyed by the National Association for Business Economics forecast growth of 2.1 percent or more in the next 12 months, up from two-thirds in the previous quarter's survey and the highest projection in a year.
Hiring prospects remain positive as well, with around one-third of economists revealing their companies added jobs in the second quarter, which is the highest level in nearly two years. Almost 40 percent of respondents said their firms would hire more in the next six months.
Housing market continues to be a driving force behind economic recovery
In addition to the employment situation, the housing market has been one of the main factors helping the economic recovery, which continued in June.
New home sales increased more than forecast, hitting a seasonally adjusted annual rate of 497,000, according to the U.S. Department of Housing and Urban Development. This was an 8.3 percent bump from the previous month and 38.1 percent year-over-year improvement. June's level beat expectations, as economists surveyed by Bloomberg called for a gain to 484,000.
"It's a builders market," Stuart Hoffman, chief economist at PNC Financial Services Group, told Bloomberg. "The housing market is poised for further gains and is a key component of the U.S. recovery overall."
Purchase order financing demand could rise with a growing economy
Should the economy begin to expand at a faster rate, small- and medium-sized manufacturers and wholesalers might need to increasingly turn to purchase order financing.
Generally, when the economy picks up, these businesses can see orders larger then they are used to handling. Instead of passing on them, manufacturers and wholesalers can turn to purchase order financing. This type of lending agreement provides businesses with up to 100 percent of the funds needed to fill an order.
In addition to allowing smaller companies to take advantage of potentially game changing orders, it enables them to avoid having to sell any equity to obtain funds.