The Mental Health Impact of High Interest Rates on Small Business Owners

Big Issue Invest is offering loans to charities and social enterprises which are struggling with rising energy costs.

Interest rates are used by banks, organisations, and companies, in order to benefit from loaning money to another.

When one party borrows money from another, there are interest rates in place which means that the party lending money will receive compensation as an incentive to lend out that money.

Person A borrows £1,000 GBP from Person B in order to expand their business.

Person B may be reluctant to lend this money, but with interest rates, they will get back £1,100 GBP once Person A can afford to pay the loan back, with interest.

Why Are They Increased & How Do They Affect Businesses?

Typically, interest rates are increased in order to control the economy by decreasing inflation and encouraging people to spend less money.

When interest rates are increased, people are paying more for previous debts, loans become more expensive, and people are generally encouraged to spend less money due to higher costs in business and costs of living.

So, if interest rates are higher, someone will now have to spend more money in order to loan a sum of money. Because interest rates are higher, they will be expected to pay more in order to loan this amount.

This can have a profound impact on business owners who need to spend money and borrow money in order to not only expand their business but to make a living. In fact, it is estimated that over 90% of mid-sized UK businesses are facing challenges accessing funding and financing due to rising interest rates.

This can have a profound financial impact on smaller businesses who rely on borrowing money.

Smaller businesses who often need loans to help upscale and grow their businesses, especially during the earlier stages, will struggle because higher interest rates mean that borrowing money is now more expensive.

The financial impact may then lead to the closure of these smaller businesses who cannot afford to borrow money.

How Financial Issues Impact Mental Health

Money and mental health is tightly interwoven, especially within societies within a country such as the United Kingdom. Since our ability to survive and be comfortable in society is dependent on being financially secure, being financially insecure can lead to severe detriments to one’s mental health.

When these small business owners suddenly find it much harder to pay back these debts, they begin to worry about sustaining their business.

Not only does their debt now seem heavier, but they may worry about closing down their business simply because it is unsustainable, and they cannot afford to accumulate more debt in order to help it.

This financial insecurity can cause a huge strain on mental health, which can not only further affect their business but their life and the life of others around them. High interest rates, among a range of other financial insecurity issues, can have an adverse impact on someone’s mental wellbeing.

Here are the ways in which high interest rates and other financial difficulties can affect the mental health of business owners in our community:

Elevated Stress & Sleep Problems

Stress, whether financially related or not, will impact our lives in any facet, regardless of if you are a student, employee, or business owner.

Suffering from stress due to financial insecurity issues or other can lead to a wide range of mental and physical illnesses ranging from but not limited to;

  • Anxiety and depression: Chronic stress can lead to the development of mental health disorders such as anxiety and depression.
  • Headaches: Headaches are a common symptom of stress which can be extremely disruptive.
  • High blood pressure & Cardiovascular Disease: Stress can lead to high blood pressure, which can then lead to a range of physical problems such as heart attacks, stroke, and more.

Additionally, someone who is suffering from stress will also suffer from decreased sleep quality.

An increased level of stress will affect someone’s sleep pattern, and it may also lead to someone working longer hours and sleeping fewer hours in order to make up for the difficulties caused by higher interest rates.

This can severely impact their work performances and also their overall quality of life.

We require from around 6 to 8 hours of sleep per night in order to feel revitalised and to foster things such as emotional regulation, memorisation, the storing of new information, replenishment of energy levels, and more.

These aspects are particularly fostered when we undergo the REM cycle of our sleep schedule. REM sleep is thought to play an important role when it comes to our basic cognitive functions and development, such as our mood, memories, and learning abilities.

REM sleep occurs throughout our night of sleeping, with people undergoing around 3 to 5 cycles per night. However, the largest chunk of REM sleep occurs in the later stages of our sleep schedule.

The later cycles can last up to an hour or even 90 minutes. Sacrificing sleep not only means missing out on a total hours of our sleeping schedule, but a larger proportion of REM sleep.

So that means that if you are struggling to sleep, or if you are sacrificing sleep in order to solve problems at work, you are not only losing 1 or 2 hours of sleep, but you are losing the largest percentage of REM sleep.

This can significantly impact your overall health on a daily basis.

Anxiety Disorder and “Financial Trauma”

The mental health impact of high interests on small business owners can also come in the form of anxiety.

If a business owner is struggling to pay bills or meet the requirements of debt arrangements, they may begin to experience severe trepidation, and this could even develop into anxiety disorder.

Symptoms of anxiety are wide ranging and are not limited to only mental effects but also physical.

Frequent bouts of anxiety can lead to a range of problems such as panic attacks, irritability, dizziness, feelings of hopelessness, problems breathing, heart palpitations, the development of substance use disorder, and so on.

Studies also suggest that if someone’s mental health suffers so severely and for a prolonged period of time from financial insecurity, they may display symptoms similar to that of PTSD.

Financial trauma ” is a term used to describe people whose mental health has been so severely affected by their financial struggles and uncertainty.

It can often lead to people restoring to inaction. Similar to a “fight, flight, or freeze” response, the sense of hopelessness which someone may experience during prolonged periods of financial strain can lead to them underperforming or essentially giving up.

This turn in their work ethic severely impacts their business which will then lead to more problems.

Deterioration in Relationships and Social Life

Not only can suffering from stress and anxiety lead to behaviour and illnesses which will inevitably result in poorer occupational performances, it can affect the lives of friends and loved ones of the business owner or worker.

Work problems and relationship problems share a mutually destructive relationship. If one facet is to suffer, then so is the other, and this will continue to a permeate a destructive cycle in one’s life.

Suffering from stress and anxiety can lead to relationship breakdown and social isolation. While some people can create a boundary between their work life and their personal life, others struggle to maintain this barrier, especially when they are a business owner.

Stress is not simply confined to the workplace. Friends, family members and loved ones of someone who is suffering from extreme bouts of stress and anxiety may find it difficult to communicate with their loved one, or to navigate their anger and trepidation due to the financial and economic climate.

This is particularly the case as many people opt to work remotely from home. If a family member is sharing the same space as someone who is suffering from a compromised mental health, then it can affect the home environment and it can profoundly affect others who live there.

Those struggling with their mental health due to work related and financial related issues may find it difficult to articulate their problems with someone who does not work within the same industry.

Not only could they begin to socially isolate, they may even become resentful of friends or family members who may not have the insight to provide answers to these problems.

Additionally, it can cause more relationship breakdown through a decrease in quality or compatibility when it comes to sexual intercourse.

Studies show that stress and anxiety can lead to sexual problems such as a decreased libido (sexual drive) and also erectile dysfunction. Furthermore, studies show that decreased sexual desire or ability for arousal has a profound effect on other areas of life, such as work.

Substance Use Disorder – Alcohol and Drug Addiction

Drug and alcohol addiction is problematic throughout the UK, particularly among people who are already suffering from mental health issues such as anxiety, depression, and more. Substance use disorder is particularly prominent among people who are suffering from financial or housing insecurity.

Stress can make someone vulnerable to developing an addiction. This is because in order to relieve themselves from feelings of anxiety, stress, anger, and more, they may indulge in toxic and addictive psychoactive substances such as drugs or alcoholic beverages.

Unemployed people are also more likely to develop a drug or alcohol dependence. This is because while they may not suffer due to stress in the workplace, unemployed people suffer from financial insecurity which then leads to anxiety.

This is called self medicating, which means the act of treating your symptoms through your own methods and not a valid one supervised or prescribed by a health professional.

Studies show a positive correspondence between stress and developing alcohol use disorders, especially within the context of financial uncertainty and work related stress. When someone frequently consumes drugs or alcohol, they will undergo extreme physiological changes in the brain and body.

Drug and Alcohol dependence reaches a point where they have become so dependent on these substances to function normally, that they will experience potentially severe withdrawal symptoms when they go a day or so without their addictive substances.

These withdrawal symptoms can come in the form of anxiety, depression, psychosis, seizures, delirium, and more.

While drugs and alcohol may temporarily relieve people of their symptoms of stress or anxiety, it will enhance them in the long run. Drugs and alcoholic substances are highly toxic in a way which can decrease brain matter and diminish basic cognitive functions such as emotional regulation, memorisation, and more.

In addition to how it severely affects brain chemistry, alcohol and drug use will decrease sleep quality, which can leave people much more compromised when it comes to their energy levels and basic cognitive functions. This will lead to more irritability, worse intrapersonal skills, relationship breakdown, and more stress.

If someone is suffering from a drug or alcohol addiction due to work or financial uncertainty, their addiction will persist regardless of their work situation if they refuse to seek support.

In order to recover from a drug or alcohol addiction, the subject will need to contact a drug and alcohol rehabilitation centre, for example, in London, in order to facilitate their recovery and return to a life of sobriety.

Weight Gain & Poor Physical Health

Work or financial related stress can also lead to significant detrimental physical health effects, which can further exacerbate mental health issues. One prominent example of this is weight gain.

Weight gain, or being overweight, is the source of insecurity and mental health issues for many people in the United Kingdom. This is due to social expectations which cause many people to heighten their imperfections and allow them to decrease their mental wellbeing.

There are numerous ways in which work related stress can lead to weight gain. These include:

  • Poor eating habits which contribute to fat gain
  • Increase in cortisol, a stress hormone, can lead to fat accumulation
  • Poor sleeping habits which further increase cortisol levels and poor choices when it comes to eating

People who are suffering from stress or anxiety will tend to make poorer decisions when it comes to eating because it can provide them comfort.

‘Comfort food’ is a term often described to make people feel better – regardless of their mental health – simply because of how good and pleasurable it feels to consume a particular food.

When we consume food, particularly foods which are high in salt and sugar, we experience a release of dopamine in the brain. The more that we engage in these activities, the more prominent these ‘rewards’ feel, strengthening pathways in our brain which can lead to overeating which will then develop into an eating disorder.

People who are suffering from poor mental health may experience weight gain or develop an unhealthy relationship with their food because they view it as a source of happiness or a form of self medicating when they are suffering from poor mental wellbeing.

Furthermore, stress leads to the release of a hormone called ‘cortisol’ in our body.

While some cortisol production is natural in bouts of exercise and other activities, frequent and excessive cortisol due to stressful experiences can lead to the accumulation of fat, particularly in the midsection (abdominal). This is why the term belly fat around the abdominal area is often associated with high stress levels.