Economic expansion could increase reliance on purchase order financing

All signs are pointing to economic expansion in the second half of the year and beyond, which would be beneficial for businesses in the United States. 

Small- and medium-sized manufacturers and wholesalers might start to see larger orders if the economy grows, which may lead to an increased need for purchase order financing

According to Fannie Mae's Economic & Strategic Research Group, GDP growth is expected to end the year up 2 percent and rise to 2.6 percent in 2014, as fiscal headwinds ease and the housing market continues to rebound. 

"Our macroeconomic and housing forecast shows very little change from July, and the steady pickup during the past few months validates our expectations for the second half of the year," said Fannie Mae Chief Economist Doug Duncan. 

Recent reports have shown that the U.S. economy is pulling itself out of the recession faster than expected, as U.S. Commerce Department figures showed a growth rate of 2.3 percent between mid 2009 and last year, up from the 2.1 percent pace that was previously stated, Bloomberg reported

When economic growth accelerates, businesses across the country could begin to see a pick up in activity. Should small- and medium-sized manufacturers and wholesalers receive orders larger than generally handled, some sort of financial assistance may be needed. 

With smaller businesses often turned away by banks for traditional loans, purchase order financing can come in handy. This type of lending agreement enables a manufacturer or wholesaler to obtain up to 100 percent of the funds needed to fill an order. The two main benefits of purchase order financing include giving businesses the ability to take advantage of large orders without tying up all their available capital or having to sell equity in their company.