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.

RELATED TERMS
  1. Squeeze

    1. In financial terms, a period of time when borrowing is difficult. ...
  2. Long Squeeze

    A long squeeze, which involves a single stock, occurs when a ...
  3. Credit Crunch

    An economic condition in which investment capital is difficult ...
  4. Five Cs Of Credit

    A method used by lenders to determine the credit worthiness of ...
  5. Character Loan

    A character loan is a type of unsecured loan that is made on ...
  6. Lender

    Someone who makes funds available to another with the expectation ...
Related Articles
  1. Personal Finance

    Personal Loans: Consider These Alternative Lenders

    Looking for an alternative source of financing for a personal loan? Take a look at these companies.
  2. Personal Finance

    The Basics of Lines of Credit

    Lines of credit are potentially useful hybrids of credit cards and normal loans. Learn how a line of credit can help (and hurt) your finances, and how to find the best one to suit your needs. ...
  3. Investing

    What is Debt Financing?

    When a company needs to pay for something, it can pay with cash, or it may finance the purchase. Financing means that it gets the money from other businesses or sources, in return for obligations. ...
  4. Investing

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  5. Investing

    Understanding Credit Risk

    Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt.
  6. Small Business

    Small Business Loan Vs Line of Credit: How They Differ

    Understand the differences between a small business loan and a line of credit, and learn some of the most appropriate uses for each form of financing.
  7. Financial Advisor

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  8. Investing

    The Short Squeeze Squeezes Into a New ETF (SQZZ)

    Looking for a way to play potential short squeezes? This ETF could be the ticket.
  9. Personal Finance

    Can't Get A Bank Loan? Turn To Your Neighbor

    Peer-to-peer lending can be an inexpensive way to gain access to credit when banks are restricting lending -- but you need to understand the entire deal first before jumping in.
  10. Personal Finance

    Purchasing a Home with Bad Credit Is Possible: Here's How

    A bad credit report can become an obstacle, resulting in denials for credit or higher interest rates, but borrowers with low credit scores can still purchase a home.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. What is a liquidity squeeze?

    A liquidity squeeze occurs when a financial event sparks concerns among financial institutions (such as banks) regarding ... Read Answer >>
  4. Why do high profiting sales mitigate credit risk?

    Learn more about credit risk in loaning to individuals and businesses. Understand how credit risk is determined and the impact ... Read Answer >>
  5. What does "squeezing the shorts" mean?

    "Squeezing the shorts" refers to a questionable practice in which a trader takes advantage of a stock that has been short ... Read Answer >>
  6. What is the difference between the Five Cs of Credit and credit rating?

    Learn the difference between the five C's of credit and credit rating and how they are used together by banks and finance ... Read Answer >>
Hot Definitions
  1. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  2. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
  5. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
  6. Interest Rate Swap

    An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
Trading Center