K-12 Tax & Spending Climate: Will boom in loans at retailers, manufacturers turn to bust?

Bernard Condon:

NEW YORK — They sell diamond rings in malls and used cars at dealerships, make wrench sets for mechanics and giant combines for farmers.

Not one has “bank” in its name, but they are all big lenders, and getting bigger by the day.

If you’re wondering how companies can get people to buy things when wages have been barely rising, check out the financial statements of some of the nation’s retailers and manufacturers. Money lent out at Signet Jewelers, CarMax and tool maker Snap-on has jumped more than 50 percent in four years at each of these companies, 2.5 times the growth of loans at banks. Financing at Deere & Co., which leases much of its farm and construction equipment, has risen 27 percent.

Companies see the loans as a useful, safe way to drum up business. Customers seem to love them, too.

What’s not to like?

If you listen to short sellers, plenty. Short sellers are investors who place bets that pay off when stocks drop, and they say that is going to happen with stocks of some of these non-traditional lenders. They say companies have gotten sloppy in picking who to lend to after seven years of super low interest rates and easy-money monetary policy, and defaults are coming.