Housing continues to fuel economy, potentially increasing need for purchase order financing

With the economic recovery now in its fourth year, the housing market is still one of the driving forces pushing it forward. 

As the economy begins to see accelerated growth, business at small- and medium-sized manufacturers and wholesalers may pick up, potentially leading to more demand for purchase order financing

Freddie Mac vice president and chief economist Frank Nothaft said GDP growth has been somewhat lackluster, but housing is helping make up for poor performance in other areas of the economy. 

"Fortunately, we should see this positive housing trend continue to improve in the second half of the year," Nothaft said. "A housing recovery is a broad-based recovery, benefiting all Americans, and therefore the overall economy."

Higher construction levels a sign of a recovery economy
July proved to be another strong month for the housing market, as new residential construction picked up – a good sign for the health of the overall economy. 

Privately-owned housing completions reached a seasonally adjusted annual rate of 774,000, up 1.8 percent from the previous month and 15 percent year-over-year, according to the U.S. Department of Housing and Urban Development. Meanwhile, housing starts jumped 5.9 percent from June and 20.9 percent when compared to a year ago, signaling that more completions could be on the horizon. 

"Builders are making every effort to keep up with the rising demand for new homes and apartments, and construction in both sectors is running well ahead of the pace we saw at this time last year," said Rick Judson, chairman of the National Association of Home Builders.

Better economy could boost purchase order financing demand
With the housing market continuing to fuel the economy, small- and medium-sized manufacturers and wholesalers could reap the benefits in the second half of the year. 

Generally, when economic growth accelerates, these companies see large orders. However, they aren't always able to fill them on their own dime. Should this be the case, financial assistance will be needed. 

Initially, manufacturers and wholesalers might turn to a bank, but smaller businesses can struggle to obtain a traditional loan. Fortunately, purchase order financing is available. This form of lending enables companies to obtain up to 100 percent of the funds needed to fill an order, which allows owners to retain full equity.