Purchase order financing demand could rise with housing continuing to fuel economic growth

For the past couple of years, the housing market has been a driving force behind the recovery of the U.S. economy, and that trend continued in July. 

With housing, and other factors, pushing economic growth, business across various industries could benefit. For instance, an improving economy could lead to small- and medium-sized manufacturers and wholesalers receiving large orders, which might create a greater need for purchase order financing

July proved to be another strong month for the housing market, with existing-home sales reaching the highest level since 2009. According to the National Association of Realtors, sales were up 6.5 percent from June and 17.2 percent year-over-year – the 25th straight month sales levels have remained higher than a year ago. 

NAR chief economist Lawrence Yun said one of the main reasons existing sales moved higher was increasing mortgage rates, which brought many buyers off the sidelines. 

Even with rising interest rates, Ward McCarthy, chief financial economist at Jefferies LLC, told Bloomberg affordability is still high in the market. 

"If you look at housing affordability it's still very attractive," he said. "I do think we'll see improvement continue but at a little bit of a slower pace as the year progresses, and frankly that's probably a healthy sign."

Should the housing market continue to lead to accelerated economic growth, small- and medium-sized manufacturers may need to increasingly rely on purchase order financing if that growth translates into large orders being received. This type of lending agreement provides businesses with up to 100 percent of the funds needed to fill an order. Two of the biggest benefits are that companies can take advantage of growth opportunities without tying up available capital or selling any equity to financiers.