Financial analysts have been arguing of late whether the banks were with-holding credit or whether people had become more conservative when it comes to getting loans.
The bank’s argument is that they haven’t with-held credit from small businesses and individual borrowers but it is the small businesses and borrowers who are unclear on what they will do with the money and that this has led to many rejections.
Critics argue that banks have made it difficult by bringing in stricter terms and also raising the interest rates.

There might be some truth to the argument that banks have raised interest rates, on look at loans for people with bad credit shows that typical interest rates for people with bad credit are around 48% whereas in the past they’ve been as low as 23%. The above chart only applies to individuals but there have been similar complains from small businesses as well.

Whatever the case maybe, things will have to change soon as nobody benefits from a lack of credit; the banks lose out since the money remains idle instead of making interest on loans and the small businesses’ cash flow suffers, they may even go out of business due to this lack of credit.