credit crunch

Credit Crunch

An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers.

Notes:

Credit crunches are usually considered to be an extension of recessions. A credit crunch makes it nearly impossible for companies to borrow because lenders are scared and the rates are higher. The consequence is a prolonged recession (or slower recovery) resulting from the supply of credit having shrunk.

See also: Debt, Economy, Interest Rate, Recession

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credit crunch

A period during which borrowed funds are difficult to obtain and, even if funds can be found, interest rates are very high. Credit crunches were particularly severe before 1980 when the ceilings on interest rates that financial institutions could pay resulted in a drying up of deposits.