Financing Squeeze

AAA

DEFINITION of 'Financing Squeeze'

A situation in which would-be borrowers find it difficult to obtain funds because lenders are afraid or unable to make loans. A financing squeeze can also occur if credit is available, but only at a price that is unaffordable for most potential borrowers. A severe financing squeeze was a major component of the Great Recession of 2008.

INVESTOPEDIA EXPLAINS 'Financing Squeeze'

Causes of a financing squeeze, also known as a credit crunch, include increased lending risk (for example, because many borrowers have been defaulting on their loans) and/or increased capital requirements (when governments force banks to hold more money in their reserves). A financing squeeze can affect all types of potential borrowers, from large corporations to small businesses to individuals.

RELATED TERMS
  1. Double-Dip Recession

    When gross domestic product (GDP) growth slides back to negative ...
  2. Capital Requirement

    The standardized requirements in place for banks and other depository ...
  3. Credit Worthiness

    An assessment of the likelihood that a borrower will default ...
  4. Credit Crisis

    A crisis that occurs when several financial institutions issue ...
  5. Credit Crunch

    An economic condition in which investment capital is difficult ...
  6. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
Related Articles
  1. Examining Credit Crunches Around The ...
    Personal Finance

    Examining Credit Crunches Around The ...

  2. 5 Signs Of A Credit Crisis
    Bonds & Fixed Income

    5 Signs Of A Credit Crisis

  3. The Bright Side Of The Credit Crisis
    Retirement

    The Bright Side Of The Credit Crisis

  4. How does a credit crunch occur?
    Investing

    How does a credit crunch occur?

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center