A survey conducted by the British Chambers of Commerce found that just 39% of participating businesses plan to increase prices in the next three months, down 13% from the previous survey results published in April, Reuters reported.
This comes as the economic outlook improves and the Bank of England considers the possibility of cutting interest rates, possibly within the next month.
The Bank of England has kept interest rates unchanged at 5.25%, and inflation had already hit the bank's 2% target in May.
How do low interest rates benefit startups?
Low interest rates are advantageous for startups in many ways, especially for those planning to secure investments.
More affordable debt may affect consumer behavior and encourage people to spend more, which could create a larger market and lead to increased sales for startups.
Here are some key ways low interest rates can benefit startups:
Improving access to capital
Lower interest rates make it easier for startups to raise capital because loan repayments are lower, making the loans more affordable.
Therefore, startups can borrow less capital and use the savings to develop other areas such as growth initiatives, equipment, and research.
Growing investor interest
Lower interest rates mean less money to save, so investors may look to more opportunities to increase their returns. Riskier investments generally accumulate higher returns than lower-risk investments, making ventures like startups (which are typically considered riskier investments) more attractive to investors.
Increased investor interest will increase the startup's chances of receiving funding, allowing it to develop and expand.
How can startups take advantage of low interest rates?
Low and stable interest rates, combined with low inflation, create a favorable environment for new and growing businesses. There are several ways startups can prepare to make the most of these conditions.
Preparing for investments and loans
While lower interest rates may make it easier for startups to obtain loans and investments, lenders and investors will still prioritize startups with strong financial track records and projections, as well as well-constructed business plans. Startups should prepare well to increase their chances of getting a favorable deal.
Startups should also refrain from blindly agreeing to the first offer they receive. Startups should carefully compare the rates and terms of different providers so they can choose the deal that is most favorable and suits their needs. These providers include banks, credit unions, and online institutions.
Prioritize strategic investments
Startups can take advantage of low borrowing costs to fund investments that will strategically benefit their business, including efforts such as expanding their product lines, entering new markets with new innovations, or updating their technology.
Low interest rates also allow startups to invest in more expensive assets, such as equipment, that might not have been possible with higher interest rates.
Manage your cash flow
Take advantage of lower interest rates by clearing debts and renewing lines of credit, which will free up cash to focus on other areas of your business and protect your company from unexpected expenses due to seasonal fluctuations.
Startups should always be aware of the long-term impact
While low interest rates may tempt startups to go all-in on investments and loans, it's important to always keep in mind the long-term impacts and the possibility of unforeseen changes.
Startups should avoid accumulating excessive debt and should always consider their ability to repay debt with interest, even if interest rates rise in the future.
Startups need to focus on maximizing profitability and prioritize measures that will help their business grow and become more profitable.
With interest rates remaining low and stable and inflation at an all-time low since 2021, startups are encouraged to make the most of this opportunity and make strategic moves that will help them expand their business and increase profitability.