Machinery replacement trumps hiring from loan funds

9/19/2011

Banks are lending more freely than they were last year, The Wall Street Journal reports. However, that lending has failed to spur job growth because the majority of businesses are using the funding to replace machinery, make repairs and upgrade equipment rather than increase employee size.

According to U.S. Federal Reserve Data, banks made $61 billion more industrial and commercial loans between January to August of this year, compared to last year during that same time period. Yet due to the failing U.S. dollar, exports are on the rise, and the business lending has done little for hiring.

"Businesspeople have come to a point where they have to spend money to replace infrastructure ... that they have put off for the last two or three years," Michael Slocum, head of commercial banking at Capital One Financial, told the news source.

One example of this is St. Bernard Parish, Louisiana-based Southern Services & Equipment, which used local contracts to keep the company in business following Hurricane Katrina, the Times Picayune reports.

"In our case, we used our SBA business loan to buy new machinery and equipment, office furniture and computers to replace those ruined by floodwaters," marketing director Mindy Nunez Airhar told the media outlet.