Purchase order finance demand could rise with job creation fueling economy

In the past couple of months, the employment situation has been a bright spot for the economy, and that trend continued in July. 

As economic growth accelerates, small- and medium-sized manufacturers, as well as wholesalers, could begin to see additional business. Should this come in the form of orders larger than typically handled, purchase order financing could prove beneficial. 

Job creation remained at a solid rate in July, with Gallup's U.S. Job Creation Index coming in at +21, down slightly from +22 in the previous month. Three components of the index that continued to fuel job creation were non-government, state government and local government jobs, while federal jobs saw a steep decline in large part due to the sequester. 

Overall, the employment situation has been fueling economic growth, and making consumers more confident. According to Fannie Mae's July 2013 National Housing Survey, 40 percent of respondents said the economy is on the right track, up 2 percentage points from June. Meanwhile, the share of respondents who said their household income is significantly higher than it was a year ago was at a survey high of 26 percent. 

Should the economy continue to improve, small- and medium-sized manufacturers and wholesalers might need to increasingly rely on purchase order financing. Economic growth typically leads to additional business, and these companies often see large orders. 

However, smaller businesses often don't have the ability to fill them on their own. For this reason, financing is needed, but traditional loans are often difficult to obtain. Fortunately, purchase order financing enables manufacturers and wholesalers to obtain up to 100 percent of the funds needed to fill an order. Using this type of financing, owners of these companies are able to retain full equity.