Explain the Term ‘Credit Crunch’ and How It Has Developed. Discuss the Implications for Uk Small and Medium- Sized Enterprises (Smes)

The term credit crunch can be defined as a sudden reduction in the availability of loans and various other types of credit from banks and capital markets. The reduced availability of credit can result from various factors, including an increased perception of risk on the part of lenders, an imposition of credit controls, or a sharp restriction of the money supply. www.teachmefinance.com/Financial_Terms. As it is a current feature in today’s economy it is constantly developing and therefore constantly effecting not only small and medium enterprises but all forms of business. Small enterprises are defined by having an annual turnover of £5.6 million or less, total fixed and current assets on its balance sheet of £2.8 million or less and 50 employees or less. They account for two thirds of employment in western economies which makes them particularly influential in the current economic climate. Similarly Medium sized enterprises can be defined by having an annual turnover of £22.8 million or less, total fixed and current assets on its balance sheet £11.4 million or less and 250 employees or less. They are both normally categorized as owner-worker enterprises, small family run businesses, small consultancies, start-up companies as well as long established businesses. The credit crunch has had an impact on both small and medium sized enterprises these are to be analysed in detail throughout. Albeit an important and hugely influential factor, the credit crunch is not the only reason for the lack of success of some small and medium sized enterprises. The development of the credit crunch will also be considered as it is critical for analysing how and why it has effected small and medium sized enterprises in the way it has.
As the credit crunch is a very much current feature in today’s economy its development is constantly changing. However its development from when it first became apparent on a global can be accounted for. Before the credit crunch began people weren’t