Credit crunch

A credit crunch is a sharp reduction in the availability of loans to households and businesses, often accompanied by tighter lending standards and higher borrowing costs.

Credit channel: The way changes in financial conditions affect economic activity by altering the availability or cost of credit. A crunch restricts this channel, reducing spending and investment beyond the initial lending shock.
Panic of 1907: A severe United States financial panic in 1907 that led to bank runs and helped prompt the creation of the Federal Reserve. Bank failures and withdrawals sharply restricted credit before a central bank could provide broad support.
Small business finance: The funding used by small firms to start, operate, and expand their businesses. Small firms often depend on bank loans and can lose investment or working capital when lending tightens.
Credit tightening: A rise in lending standards or borrowing costs that makes credit harder to obtain without necessarily causing a sharp collapse in loan supply. Tightening can precede or accompany a crunch, but does not always become a broad contraction.
Bank capital: The funds banks hold to absorb losses and support their assets, including loans. Loan losses erode capital and can force banks to limit new lending.
Great Depression: A worldwide economic crisis beginning in 1929, marked by prolonged contraction, mass unemployment, and financial collapse. Bank failures and collapsing money and credit magnified the downturn in the United States.
Mortgage lending: The provision of loans secured by residential property to finance home purchases or refinancing. Tighter mortgage availability can reduce home purchases and deepen housing-market declines.
Bank run: A rapid withdrawal of deposits by many customers who fear a bank will fail. A run threatens a bank's funding; a crunch describes the wider reduction in available loans.
Nonperforming loan: A loan on which the borrower has stopped making scheduled payments or is unlikely to repay in full. Rising defaults weaken lenders and make them more cautious about extending credit.
Savings and loan crisis: A United States banking crisis of the 1980s and early 1990s involving widespread failures of savings and loan associations. Failures and resolution costs constrained lending by institutions central to mortgage finance.

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