The percentage of an amount of money charged for its use per some period of time. In the financial dialect it can also be said to be the total additional amount that is charge upon request of certain money.
However, several ways are there today in getting funds for startups, but the big question is are the readily available capital favourable in terms of getting them on a high interest rate ??? The answer is big No.
During my undergraduate study I came to realized that seventy percent (70%) of start-ups usually failed before they could reach their first year of operations. According to research that were published on different business websites 3 out of 5 stated that it has to do with the the high interest rate given to start-ups to do there businesses. In some part of the world there are other ways of getting funds instead of going to financial institutions that would charge an unfavorable returned.
Angel networks are perfect funds to go in for when going into business as a startups. In a case were there are no angel networks the ultimate option normally available is to face the banking or micro finance institutions to get funds.
In a scenario where you take certain amount of money at the bank and asked to pay an interest of 35% in 2 years… The one million dollar question is can the startup be able to pay that tremendous amount of interest in two years? No is the answer. For simple fact, a lot of other expenses are to be handle in the hands of the startup.
High interest rate normally served as bottle necks in the face of start-ups in moving forward with their business.
When interest rates rise, banks charge more for business loans. This means you’ll need to use more of your earnings to pay interest on your loans, which decreases profits. You might decide not to start new projects or expansions during periods of high interest rates, which hampers the growth of the company.