Confidence among small business owners increased for the second straight month in May, potentially leading to a greater need for retail inventory financing.
Should higher confidence translate to more sales for small- to medium-sized retailers, these companies could have a need to replenish inventory, which is where asset-based lending may be beneficial.
The National Federation of Independent Business' Index of Small Business Optimism increased by 2.3 points in May to a final reading of 94.4. This is the second highest reading since the recession started.
Eight of the 10 index components jumped, signaling an easing in pessimism about the economy and future sales.
NFIB chief economist Bill Dunkelberg is still concerned about the economy, but it has shown signs of improvement in the past couple months.
"Small-business confidence rising is always a good thing, but it's tough to be excited by meager growth in an otherwise tepid economy," he said.
One area he believes needs to improve is the employment situation, which has begun to show some positive signs, but at a less-than-stellar rate. According to the Bureau of Labor Statistics, the U.S. economy added 175,000 jobs in May.
"The economy has really held up much better than expected, considering the strong fiscal headwinds that we're experiencing now," Russell Price, senior economist at Ameriprise Financial, told Bloomberg. "The underlying fundamentals of the economy are very supportive, and once these headwinds recede somewhat, that the economy gain momentum."
With small business confidence on the rise, and the economy beginning to gain steam, small retailers could see additional sales in the near future.
To help keep shelves stocked, these businesses might need to utilize inventory financing, allowing them to use current product as collateral to obtain a revolving line of credit, which, in turn, can be used to replenish inventory.