How do higher interest rates typically impact businesses?

Higher interest rates typically result in increased borrowing costs for businesses. When interest rates rise, the cost of loans and credit becomes more expensive, which can lead businesses to rethink their expansion plans or postpone investments in new projects. This reduced access to affordable financing can inhibit growth potential, causing companies to slow down or even halt their development plans as they adjust to the higher costs associated with borrowing. Consequently, businesses may cut back on spending, hiring, or expansion efforts, directly impacting their growth trajectories.

The options related to increased growth potential and decreased borrowing costs do not reflect the common economic understanding of the relationship between interest rates and business financing. Instead, higher rates usually present challenges that constrain business growth, making the correct answer an accurate reflection of economic principles.