Financing Squeeze

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.

BREAKING DOWN '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.

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RELATED FAQS
  1. What is the difference between a short squeeze and a long squeeze?

    Learn about short long squeezes, the difference between short and long squeezes, and how investors and traders can be squeezed ... Read Answer >>
  2. How does a credit crunch occur?

    A credit crunch occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to ... Read Answer >>
  3. How can I evaluate if a stock is a short squeeze?

    Determine whether a stock is a short squeeze by studying the catalyst that caused the rally. Traders need to determine whether ... Read Answer >>
  4. How is the short interest of a company related to a short squeeze of a company?

    Learn about the short interest and short squeeze, how to determine if a stock is a short squeeze candidate and how short ... Read Answer >>
  5. How does days to cover a short position relate to a short squeeze?

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  6. What is the difference between the Five Cs of Credit and credit rating?

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