High interest rates can have a detrimental effect on startups for several reasons:
Increased Cost of Capital: Startups often require external funding to get off the ground. High interest rates increase the cost of loans, making it more expensive to finance new ventures. Reduced Access to Credit: Banks and other lending institutions may tighten their lending criteria, making it harder for new businesses to secure the necessary capital. Impact on Cash Flow: Higher interest payments can strain a startup's cash flow, potentially limiting their ability to invest in growth opportunities.