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Chrysler Financial dropped its request for additional federal aid, saying that it had enough money to cover its short-term needs.

The company notified the U.S. Treasury Department of its decision late Thursday night. Chrysler Financial, which provides car loans to Chrysler LLC, formally asked for a second round of funding on March 18 after receiving an initial cash infusion of $1.5 billion in January.

Some loosening in the credit markets and stabilization in the banks is helping bolster Chrysler Financial's funding, Chrysler Financial spokeswoman Amber Gowen confirmed. The federal request had not been officially withdrawn since Chrysler Financial is trying to keep its options open, she added.

Gowen said the company is still awaiting approval from the Federal Deposit Insurance Corp. on whether it can become an industrial bank holding corporation. An industrial bank designation will allow Chrysler Financial to access more funding from the federal government. General Motors Corp.'s (GM) GMAC lending subsidiary became a bank holding company earlier this year.

Chrysler Chief Executive Bob Nardelli said in March that the finance company needed more money so the auto maker could continue offering incentives in order to pull more consumers into its showrooms.

-By Jeff Bennett, Dow Jones Newswires; 248-204-5542; jeff.bennett@dowjones.com