The Difficulties Met When Trying to Obtain Credit

Submitted by Laura Brown

The global economic crisis has caused a credit crunch worldwide, making it hard for individuals, small businesses, and even large companies to obtain the credit that they need in order to survive. This is causing companies to seek debt management in order to figure out what to do.

Due to the fact that credit is so hard to obtain, companies are laying off people, cutting down on orders, not growing and expanding their business and even at times making it difficult to meet weekly payroll. The affects of the credit crunch have been devastating to a number of industries. Automakers, which rely on customers being able to get access to credit to finance their purchase of their products, have simply been devastated. Most major global automakers have seen a drop over 30%, and some car companies have been doing even worse. Due to this fact, many carmakers around the world have been forced to seek loan guarantees from the government or even direct capital into their companies just to continue operations. Without direct government support, automakers would be forced to seek bankruptcy protections. During normal economic times, this wouldn’t necessary be a bad thing, but during this economic crisis, if a company were to go into bankruptcy protection, it would be highly unlikely that they would be able to get the credit they need while they reorganize their business.

Banks are also taking the brunt of the pain during the global economic crisis. Due to the fact that so many people are unable to pay back the loans that they are supposed to repay, banks are losing a ton of revenue. In addition, the banks got affected again because they are holding mortgages which are considered “toxic”. As a result of all the foreclosures, banks are extremely scared to lend money because they are worried that they will lose more money. Banks carry the stigma of being a cause of the crisis, but certainly is can be argued that they have been affected more than almost any other industry. Credit Card companies have been affected, and as a result they are cutting the limits of their consumers credit cards, which in terms affects overall spending throughout the economy.