Interest rates have a wide-reaching impact on business

The Holistic Accountant

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In this episode, Mena and Stuart dive into the various ways rising interest rates can impact businesses. They explain how higher interest rates directly affect business valuation by reducing multiples, as higher required returns lower company values. The discussion also covers the increasing costs of holding inventory and tighter payment terms from creditors due to higher interest rates.
They address the rising cost of capital for businesses seeking funding through credit cards, overdrafts, and bank bills, noting borrowing costs can now reach 7.5% to 8.5% per annum. Additionally, both consumer and business demand take a hit, with less discretionary spending available, which can slow business growth and alter purchasing behaviours.
Mena and Stuart highlight the challenges higher interest rates pose to personal cash flow needs from business, and they offer insights on navigating these conditions by focusing on sectors less sensitive to rate changes, securing contract revenue, and continuously adding value to customers regardless of the economic environment.

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