Purchase order financing demand could rise with employment situation fueling economy

The jobs market has been one of the bright spots for the economy in the past couple of months, and that is likely to continue in July. 

Should the improving employment situation fuel economic growth in the second half of the year, small- to medium-sized manufacturers and wholesalers might begin to see additional business, which could create a greater need for purchase order financing

According to a Bloomberg survey of economists, payrolls are projected to increase by 185,000 in July, following the 195,000 gain in the previous month. July's job growth is expected to push the unemployment rate down to 7.5 percent. 

"Hiring has been remarkably stable for the most part and there's no reason to suspect that won't continue," Brian Jones, senior U.S. economist at Societe Generale, told Bloomberg. "Economic growth is going to accelerate in the second half. Everybody is penciling in a tapering by the Fed in September."

In the first six months of the year, payroll gains averaged 202,000 per month, up from 180,000 in the second half of 2012, the source noted. Economists at UniCredit Group and Deutsche Bank Securities, said employment growth of that level generally leads to GDP increases of 3 percent, which could be a good sign for the overall economy. 

"The employment numbers are closer to the true picture," Harm Bandholz, chief U.S. economist at UniCredit, told Bloomberg. "I'm confident GDP growth will pick up in the second half and even more in 2014."

Growing economy could increase purchase order financing demand
Should Bandholz be right, and economic growth picks up in the final half of the year and into 2014, small- and medium-sized manufacturers and wholesalers may need to increasingly rely on purchase order financing. 

When growth accelerates, these businesses tend to see orders larger than they are used to handling. For example, if a big order from Target or Walmart comes in, it could be difficult to fill it on their own dime. 

Luckily, purchase order financing is available, and gives businesses the opportunity to obtain up to 100 percent of the funds needed to complete an order. This can be beneficial for businesses that are turned away by banks for any number of reasons, such as limited available capital, lagging cash flow or a poor credit score.