What's the impact of rising interest rates on business loans?

Rising interest rates increase the cost of borrowing, making business loans more expensive. This discourages some companies from taking out loans for expansion, equipment purchases, or operational funding. Higher interest payments reduce cash flow and may affect profitability, particularly for small and medium-sized enterprises. Businesses with existing variable-rate loans see their debt servicing costs rise, tightening budgets and limiting reinvestment opportunities. Startups and newer companies may find it harder to qualify for affordable financing. Overall, rising interest rates can slow down business activity, delay investment plans, and heighten financial risk. However, they may also prompt businesses to improve efficiency and prioritize high-return projects to justify the higher cost of capital.