While consumers might be pulling back on spending a bit, the housing market continues to drive economic growth, which could lead to increased demand for purchase order financing.
As the economy grows at a faster pace, small- and medium-sized manufacturers and wholesalers might begin to see orders larger than the usually handle. Should this be the case, financial assistance might be needed to fill them, which is where purchase order financing could prove to be beneficial.
One positive indicator for the housing market is the fact that the National Association of Home Builders/First American Improving Markets Index remained strong in July. Although it declined from 263 metros to 255, the IMI was more than triple what it was in July 2012.
"This is the sixth straight month in which at least 70 percent of all U.S. metros have qualified for the Improving Markets Index," said NAHB chairman Rick Judson. "The relative stability of the IMI is representative of the broad recovery underway, which is much more extensive than what we were looking at one year ago."
Rising builder confidence another positive sign for the economy and housing
Builder confidence in the market for newly built, single-family homes increased for the third consecutive month in July to the strongest reading since January of 2006.
The National Association of Home Builders/Wells Fargo Housing Market Index rose six points to 57, a sign that builders are more confident in the housing market and economy as a whole.
"Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten," said NAHB chief economist David Crowe. "Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften."
Purchase order financing demand could pick up if the economy grows at a faster pace
Should economic growth accelerate in the coming months, small- to medium-sized manufacturers and wholesalers may need to rely on purchase order financing to handle additional business.
Oftentimes, these companies see larger orders when the economy improves, and financial assistance is needed to take advantage of these potential game-changing opportunities.
This type of lending agreement allows manufacturers and wholesalers to receive up to 100 percent of the funds needed to fill an order, which enables owners of these businesses to avoid having to sell any equity.