Small business optimism edges up, purchase order financing demand may follow suit

The past couple of months have been a struggle for small businesses, but July brought an increased sense of optimism. 

Should small- and medium-sized manufacturers and wholesalers begin to grow at a faster pace, purchase order financing demand may increase as these businesses need to rely on financing to be able to fill large orders. 

Small business optimism increased to 94.1 in July, up from 93.5 in the previous month, according to the National Federation of Independent Business. While NFIB chief economist Bill Dunkelberg said there is a ways to go before reaching pre-recession levels, July's reading was the fourth higher since December 2007.

Part of the reason small businesses are more optimistic is strong job creation. According to the ADP National Employment Report, 84,000 new positions were created in July by these smaller firms, outpacing medium and large companies. 

"The job market continues to gracefully navigate through the strongly blowing fiscal headwinds," said Mark Zandi, chief economist of Moody's Analytics. "Health Care Reform does not appear to be significantly hampering job growth, at least not so far. Job gains are broad based across industries and businesses of all sizes."

As small- to medium-sized manufacturers and wholesales begin to grow, orders larger than usual could start to come in. With most businesses of this size having limited available capital, some sort of financing is needed to be able to fill such orders. 

Fortunately, purchase order financing can provide manufacturers and wholesalers up to 100 percent of the funds needed so these companies are able to take advantage of opportunities of growth. With the ability to secure financing, owners of these companies are not forced to sell equity to financiers to complete orders.