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Credit crunch - Essay Example

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Credit crunch

At this point, credit rationing takes place. In most times, a credit crunch is followed by a shift to quality by the lenders and owners of capital as they look out for investments which are less risky normally at the expense of the medium and small sized enterprises (Hull 2).
The credit crunch has had an influence on small and medium sized business in various adverse ways. Despite its significant and largely powerful impact, the credit crunch might not be the sole reason for the inadequate success of some selected small and medium sized business enterprises. The growth of the credit crisis will also be taken into consideration as it is crucial in evaluating the way and the manner in which it has influenced the small and medium sized businesses in the dimension it has. As the credit crunch is a very much late feature in the current economy, its growth is frequently varying. Nevertheless, its growth since its inception in the global perspective has been put into consideration.
The world economic crunch which started in 2007 was perhaps the most phenomenon shock to ever affect the economy of the United Kingdom to be ever remembered. Ever since the onset of this predicament, so much has taken place that might initially have been assumed to be impossible: The implicit nationalization of two of the largest banks in UK, a state deficit which came in double digits, a depressing grading on the AAA credit rating of the UK, a decline in Bank of England’s base rate which went down to 150 basic points lower than its previous all time low and a programme quantitative easing of £ 200,000 (Heine 27). These phenomenon occurrences have called for essential reforms of the conventional evaluation of the UK economy.
As it is a contemporary feature in the current economy it is frequently growing and thus regularly having an impact on all forms of business including small and medium sized enterprises. Small ...Show more

Summary

Credit crunch refers to the reduction in the common accessibility to loans or the abrupt contraction of the conditions necessary to acquire loans from the financial institutions. Credit crunch essentially consists of a contraction in the accessibility of loans following a rise…
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Credit crunch essay example
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