Lately I have been seeing that the rising interest rates are the cause for major tech layoffs and also for the drop in Startup Funding (not including AI). But I cannot grasp why that happens and the effects
In: Economics
Interest rates are the cost to borrow money….
Most businesses have debt; starting new divisions, product lines, offices, shelf space, advertising all costs money. Businesses get a loan and then pay back the loan with future sales/earnings
If you get a 10 million loan at 2% the total repayment is a lot less than 10million at 5%
Loans can also be adjustable….so maybe you initiated that 10m loan at 2% back in 2019…but it now is 5%. You have to find the difference in those repayments; if the sales also slow you have to reduce costs
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