Purchase order financing demand could rise with employment pushing economic recovery

The past couple months have seen the employment situation improve across the country, which could lead to further economic growth and greater demand for purchase order financing

As the economy gains momentum, wholesalers could begin to see additional business in the form of larger orders. To be able to fill these orders, small-to medium-sized companies might need to rely on financial assistance. 

The employment situation recently got some more positive news with another indicator showing improvement. The Conference Board Employment Trends Index rose slightly from 111.11 in April to 111.76 in May. This level was 3 percent higher than a year ago. 

Director of macroeconomic research at The Conference Board said May's ETI gain helped erase small declines seen in the previous two months. 

The boost in the ETI could be a result of the solid jobs report from May. The Bureau of Labor Statistics reported 175,000 new positions were added to payrolls, with employment rising in professional and business services, food services and drinking places and retail trade. 

"The economy has really held up much better than expected, considering the strong fiscal headwinds that we're experiencing right now," Russell Price, senior economist at Ameriprise Financial, told Bloomberg. "The underlying fundamentals of the economy are very supportive, and once these headwinds recede somewhat, that the economy can gain momentum."

Should economic growth accelerate in the near future, wholesalers may begin to see orders from big-box retailers, such as Target or Walmart. Smaller companies can struggle to fill these on their own with limited available capital, which is where purchase order financing can be beneficial. 

This type of lending agreement allows wholesalers to receive up to 100 percent of the funds needed to fill an order so they don't need to sell equity in their company.