By Louis du Plessis
CEO Pollen Finance | Oct 7, 2026 | 8 min read
Interest rates are one of those economic indicators business owners are told to watch.The Reserve Bank makes an announcement, economists debate what it means, headlines appear almost immediately, and then everyone moves on.
But for a small business owner, an interest rate decision isn’t really about a percentage on a screen. It shows up somewhere much more practical. Like in the monthly repayment on a vehicle, the cost of carrying stock, or how confident you feel about making the next investment.
That’s why I think interest rates matter to SMEs in ways that are much broader than the cost of borrowing. They influence the decisions businesses make every day.
South African businesses have been operating through a changing interest-rate environment.
After a period of easing, inflation pressures returned in 2026 and the South African Reserve Bank increased its policy rate to 7% in May. It kept the rate unchanged at its July meeting.
At the same time, inflation has moved around considerably. Headline consumer inflation reached 5% in June before easing to 4.3% in July.
For business owners, that creates the familiar challenge of uncertainty. Rates may change, input costs may change, and customers may behave differently. But salaries, rent, suppliers and operating expenses still need to be managed every month.
That is where monetary policy becomes business reality.
The most obvious effect of higher interest rates is that borrowing becomes more expensive. A variable-rate business loan may cost more, vehicle finance may become more expensive, or an overdraft becomes more costly to use. But that is only the first layer.
Interest rates move through an economy. They influence households, and households influence businesses, and businesses influence one another. In essence, that means an interest-rate decision can affect an SME even if the business has no debt at all.
For businesses with variable-rate debt, rate changes can affect monthly repayments. That may include business loans, property finance, or other floating-rate facilities.
A relatively small percentage-point change can become meaningful when applied to a large outstanding balance. The effect is not just financial. Higher repayments reduce the amount of cash available for everything else.
The financing decision you made two years ago can suddenly start influencing the decisions you make today.
This is the part of the interest-rate conversation I think businesses sometimes overlook.
Your customers live in the same economy you do. If households are paying more towards bonds, vehicle finance and other debt, they have less disposable income. And that can change how they spend. People may delay larger purchases, eat out less frequently, or reduce discretionary spending.
For consumer-facing SMEs, the effect can appear quite quickly. The interest rate hasn’t changed anything inside your business. But it has changed the financial position of the person standing on the other side of the counter.
The same thing happens in B2B markets. When money becomes more expensive, companies often reassess investment. A customer may delay new equipment, marketing projects, or fleet purchases.
Sales cycles can become longer, budgets get scrutinised more carefully, procurement becomes more cautious. Suddenly, your customer isn’t only asking whether they want what you sell. They’re asking whether now is the right time to buy it.
Every investment has an expected return. If borrowing becomes more expensive, that return needs to work harder. Imagine you’re considering a second location, another vehicle, or a piece of machinery. When the cost of capital rises, an opportunity that made sense at one interest rate may look less attractive at another.
That doesn’t mean businesses should stop investing when rates are high. It means the maths matters more. And business owners need to consider questions like, what additional revenue will this investment create, how long will that take, what happens if sales are slower than expected, and can the business still comfortably meet its obligations?
Good businesses ask those questions in any environment, but higher rates simply make them harder to ignore.
When financing is cheap, businesses can sometimes afford to be less disciplined about working capital. When it becomes expensive, inefficiency gets exposed. Stock sitting on a shelf costs more, late customer payments hurt more, an unused overdraft facility matters less than one that stays permanently drawn, and long supplier cycles become more noticeable.
Higher rates have a strange way of reminding businesses that cash itself has value. And I think that’s not necessarily a bad lesson.
Interest rates don’t only affect spreadsheets, they also change psychology. When rates rise, people become more cautious.
Sometimes the anticipation of a rate change can influence behaviour before the change itself happens. That’s why monetary policy is partly about expectations. And businesses operate on expectations too.
The process can work in the opposite direction. Lower interest rates can reduce the cost of debt, households may have more disposable income, investment can become more attractive, and businesses may feel more confident about expanding.
But I wouldn’t build a business strategy around waiting for cheaper money. Interest-rate cycles change and businesses need to work through both.
The opportunity is to use favourable periods to strengthen the business rather than simply increase spending.
I don’t think business owners need to become economists, but they should understand their exposure. A few questions are worth asking.
Know which obligations will change when benchmark rates move.
Could the business absorb another increase in repayments without creating cash flow pressure?
If household budgets become tighter, how does that affect demand for what we sell?
Growth decisions should be tested at different cost and revenue assumptions.
Look at stock, debtors, supplier terms and unnecessary cash tied up in the business.
Finance should help create value. A higher-rate environment makes that distinction even more important.
One thing I worry about is businesses becoming paralysed by economic headlines. Waiting for the perfect rate, perfect exchange rate, perfect political environment, or perfect consumer. That moment rarely arrives.
South African entrepreneurs have never had the luxury of building businesses in perfect conditions.And although that doesn’t mean ignoring the economy it does mean understanding what you can control.
You can’t control the policy rate, but you can control:
That is where I would spend my energy.
Everyone wants to know whether interest rates are going up or down next. I’m not convinced that’s the most useful question for a business owner.
The more useful question is:
What happens to my business if they do?
If rates rise, what changes? If they fall, what opportunity does that create? If they stay where they are for another year, can the business still execute its plan?
You can’t predict the economy, but you can prepare for more than one version of it. That is how resilient businesses are built.
Interest rates matter. They affect everything from borrowing cost and investment to confidence. But they are still only one part of the environment in which businesses operate.
I have seen businesses grow during difficult rate cycles and I’ve seen businesses struggle during favourable ones. The difference is rarely one economic variable. It is usually how well the business understands its numbers, manages its cash and responds to changing conditions.
So yes, watch the interest-rate announcement, understand what it means, but then get back to building. Because the businesses that last are not the ones built strongly enough to keep moving when it turns.
About the author
Louis du Plessis is the CEO of Pollen Finance, helping established South African businesses access funding to seize growth opportunities. He writes about business funding, cash flow and entrepreneurship, drawing on over a decade of experience working alongside SMEs.
