Strong economic outlook points to increased reliance on purchase order financing

When the economy grows, activity at businesses typically picks up. With a bright economic outlook, small- and medium-sized manufacturers and wholesalers could reap the benefits by receiving orders larger than usually handled. As a result, these companies will likely need some sort of financial assistance, which is where purchase order financing can come in handy, as smaller businesses often struggle to obtain loans from banks. 

The Conference Board Leading Economic Index was unchanged in June at 95.3, but the outlook still remains positive. 

"The U.S. LEI was flat in June," said Ataman Ozyildirim, economist at The Conference Board. "Declines in building permits, new orders and stock prices were offset by gains in consumer expectations, initial claims for unemployment insurance, and other financial indicators. However, the LEI's six-month growth rate remains positive, suggesting the economy will continue expanding through the end of the year."

One of the biggest signs that the economy is on the right track is the fact that consumers are beginning to spend more. According to the U.S. Department of Commerce, household expenditures increased 0.2 percent in June, showing that fiscal headwinds haven't been a huge impact. 

If economic growth continues to accelerate in the coming months, small- and medium-sized manufacturers and wholesalers might have to turn to purchase order financing if business picks up. 

When large orders come in, smaller companies can struggle to fill them on their own dime. Fortunately, this type of lending agreement allows a business to receive up to 100 percent of the funds needed to fill an order, which prevents them from having to sell off any equity in the company to financiers. Being able to take advantage of opportunities for growth without having to tie up any available capital is a major benefit for small companies, and it can help them keep up with their larger counterparts.