For many years following the financial crisis, the U.S. economy was sluggish, but that has changed in the past year and a half.
With numerous factors pushing economic growth, business across numerous industries could pick up. As a result, small- and medium-sized manufacturers and wholesalers may start to see orders larger than they usually handle.
To finance such orders, these companies might first turn to a bank, but smaller businesses are often denied by these financial institutions. When that happens, purchase order financing could prove beneficial.
Home prices continued to rise in June
One sign that the economy is continuing to improve is rising home prices. For the past 16 months, the housing market has seen price appreciation, and that didn't change in June. CoreLogic's Home Price Index revealed a 1.9 percent bump from the previous month and an 11.9 percent year-over-year improvement.
"The U.S. housing market experienced robust price appreciation during the first half of 2013 and our forecast calls for double-digit growth through July," said Anand Nallathambi, president and CEO of CoreLogic. "Despite their rebound of late, home prices remain reasonable in a historical context, with most states near peak affordability levels."
Moving forward, price gains are expected to continue, a sign that the economy could improve further in the coming months. CoreLogic's Pending HPI said July home prices will rise 1.3 percent from June and 12.5 percent when compared to a year ago.
"This trend in home price gains is moving at the fastest pace since 1977," said Mark Fleming, chief economist at CoreLogic.
High consumer confidence levels another sign U.S. economy is improving
July proved to be a strong month for consumers, with sentiment reaching a six-year high. The Thomson Reuters/University of Michigan Index of Consumer Sentiment hit 85.1, up from 84.1 in June and 72.3 a year ago.
"The July survey suggests a growing resilience among consumers that will enable them to more easily withstand the cross-current inevitable in a slow growth economy," said Surveys of Consumers chief economist Richard Curtin.
Consumers also showed high confidence in current economic conditions, with the index measuring this sentiment rising 5.1 percent from the previous month and 19.2 percent year-over-year.
Purchase order financing demand could rise with a better economy
As economic growth accelerates, small- and medium-sized manufacturers and wholesalers will likely see a pick up in business. Should this come in the form of large orders from big-box retailers such as Target and Walmart, some sort of financial assistance may be needed.
Small companies often have limited available capital and poor cash flow, which can make it difficult to get a traditional loan from a bank, but purchase order financing is available to qualifying businesses. This type of lending agreement allows manufacturers and wholesalers to obtain up to 100 percent of the funds needed to fill an order.
The major benefit of purchase order financing is that it allows businesses to take advantage of game-changing opportunities without having to sell any equity to financiers.