“According to a definition, “A credit crunch refers to a decline in lending activity by financial institutions brought on by a sudden shortage of funds. Often an extension of a recession, a credit crunch makes it nearly impossible for companies to borrow because lenders are scared of bankruptcies or defaults, resulting in higher rates.”
Generally speaking, a credit crunch occurs when there is a shortage of capital for lending. It is a sudden change in certain factors that lead to a shortfall in the amount of money that can be loaned to individuals and businesses. It is also known as credit squeeze or credit crisis.”