Small Manufacturers Buy Big Machines

Small businesses that make machines and components for other manufacturers are experiencing an upswing that could be a sign of things to come for the broader economy, Bloomberg BusinessWeek reports.

The increase in demand for gears that businesses use to make a variety of machines, parts, tools and devices is a sign that companies are more confident and are willing to spend. These companies, according to the article, are also getting loans from banks to buy the equipment, evidence that lenders are feeling more secure.

Last year, industrial and materials manufacturers had a 37% increase in big equipment purchases, according to PayNet, a company that tracks lending to small businesses. That compares to an average of 17% for all the industries PayNet follows.

Skeptics should talk to the bankers who grant loans like Anthony Cracchiolo, president of U.S. Bank’s equipment finance unit. U.S. Bank’s lending through its Manufacturing Vendor Services division, part of the equipment finance unit, is up 15% this year from the same period of 2011.

And last year’s lending level was up 26% from 2010. Equipment sales had fallen 70% during the recession.

More recently, the bank, which is based in Minneapolis and has branches in 25 states, has seen an increase in demand for big machines like lasers, molding equipment and plastic injection machines.

By the end of this year, U.S. Bank expects this type of lending to be at 90% of pre-recession levels. It expects the recovery among these manufacturers to reach other parts of the economy.