Credit Crunch
Credit Crunch – a reduction in the general availability of loans or credit or a sudden tightening of the conditions required to obtain a loan from the banks or other finance providers. Many times a credit crunch is accompanied by a ‘flight to quality’ by lenders and investors as they seek less risky investments, often at the expense of small to medium size enterprises.
With many saying that the downturn will be worse than any we have ever known how are SME’s going to survive. Banks are virtually not lending to SME’s at a time when financial backing is needed the most. Retail took yet another hit today with results down 1.8% on the same period last year and electrical retailers being the worst effected businesses need more help than ever.
The question is how do we get out of this recession pit that we are currently in? The simple answer is the banks need to start lending again, not lending at 125% loan to value like they used to but sensible lending, they need the income to counter the toxic debt that they are currently experiencing. When will this happen? Nobody knows, with the government continually pumping money into the financial institutions the hope is that it will be soon, the reality is that it could be at least a year from now.