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 Interest rate are the economy’s single strong influences. Interest rates
have the ability to either cost high liquidity position or in all liquid
position.
 Demand for borrowing capital is inversely related to interest rates, the
higher the interest rate lesser are the number of companies that are
willing to borrow at such rate.
 Investment are directly proportional to interest rates, that means people
are willing to invest since they are getting a higher interest amount.
 Interest rates also affect the prices of many investments , especially
stocks because interest rates are the key components of present and
future rate calculations
  There has been much discussion about how
higher interest rates impact consumers. It’s
important to understand that higher rates
also can have an impact on businesses . There
are three ways to impact the business.
1. Business planning:
2. Cash flow
3. Customer spending and savings
 An increase in interest rates can likely have an
impact on an owner’s ability to grow a business.
When interest rates rise, banks charge more for
business loans.
 While small business owners with fixed rate
loans may not be affected immediately when
interest rates rise, company owners with loans
that have fluctuating interest rates may find
their loans more difficult to repay.
 Higher loan payments may lead to a reduction in
profitability, which can make securing future
funding more difficult
 Small businesses tend to operate with limited
cash flow, so when interest rates rise, the
additional cash needed to repay loans can be
scarce.
 In addition, short-term loans to cover cash
flow gaps may be difficult to qualify for or too
pricey to afford. This could cause a host of
issues. Business owners may have to delay
paying their receivables, or put off
investment plans.
 Changing customer spending habits triggered by
rising interest rates may also reduce cash flow.
When consumers have to pay higher interest on
personal loans, including mortgages and auto
loans, they have less disposable income to buy
goods and services.
 In a rising rate environment, consumer-driven
businesses often see a reduction in sales, further
squeezing cash flow.
 In addition, higher interest rates make it more
attractive for both consumers and businesses to
save excess cash rather than spend it.