Strengthening labor market could increase reliance on purchase order financing

The U.S. economy has been showing signs of strength in the past couple of months, with the employment situation being one of the main drivers. 

As economic growth accelerates, business across numerous industries can pick up, including manufacturing and wholesale. A result of this could be small-  and medium-sized companies receiving orders larger than typically handled. To ensure these are filled, purchase order financing can be utilized. 

The labor market recently received more good news, as initial jobless claims hit a six-year low. The week ending August 10 saw claims drop by 15,000 to 335,000, according to the U.S. Department of Labor. This decline brought the four-week moving average down to 332,000, from 336,000 in the previous seven-day period. 

With the slowdown in firings, companies may begin to pick up hiring, which can boost household wealth and economic growth in the second half of the year. 

"The labor market is improving," Brian Jones, senior U.S. economist at Societe Generale, told Bloomberg. "We've got decent momentum on consumer spending heading into the third quarter."

Favorable economic conditions could be a good sign for small- to medium-sized manufacturers and wholesalers, as opportunities for growth could present themselves. For one, larger orders may come in, but smaller companies often struggle to fill them on their own dime. 

Fortunately, purchase order financing is available to aid businesses who were turned away by a bank and don't have the capital to fund an order. This type of lending agreement enables manufacturers and wholesalers to obtain up to 100 percent of the funds needed to complete an order. One of the biggest benefits of purchase order financing is that it allows companies to take on orders from big-box retailers such as Target or Walmart without tying up all available capital.