Yesterday, the Bank of England decided to keep interest rates on hold.

If your first reaction was a shrug, you're probably not alone.

Interest rate decisions can feel like something that matters to economists, mortgage holders and people on the evening news. But whether you're running a café, a plumbing business, an online shop or a growing agency, interest rates can have a bigger impact on your business than you might realise.

And not just when you're borrowing money.

First things first: what is the Bank of England base rate?

The base rate is the interest rate set by the Bank of England. It influences how much banks and lenders charge businesses and consumers to borrow money, as well as the rates they offer on savings.

When the base rate goes up, borrowing generally becomes more expensive.

When it comes down, borrowing tends to become cheaper.

Simple enough.

The challenge is that interest rates don't just affect loans. They ripple through the entire economy.

What does a rate hold actually mean?

A rate hold means the Bank of England has decided not to increase or reduce interest rates.

For businesses, it provides a degree of certainty.

If you're already repaying a business loan or using a variable-rate finance product, your costs are unlikely to change immediately. If you're considering borrowing, lenders are also more likely to keep pricing broadly stable in the short term.

That's good news for businesses that have spent the last few years dealing with rising costs and economic uncertainty.

Interest rates affect customer spending too

This is where many business owners underestimate the impact.

Higher interest rates often mean higher mortgage payments and increased borrowing costs for households. When people have less disposable income, they tend to spend less.

That can affect everything from restaurant bookings and retail sales to home improvements and professional services.

Even if your business has never taken out a loan, interest rates can still influence demand for your products or services.

They affect business confidence

Small business owners make decisions every day about hiring, investing, expanding and purchasing equipment.

Those decisions are often linked to confidence.

When interest rates are rising, many businesses become more cautious. Expansion plans are delayed. Recruitment is postponed. Investment decisions get pushed back.

When rates stabilise or begin to fall, confidence often improves because future costs become easier to predict.

In many ways, certainty can be almost as valuable as lower rates.

Borrowing isn't always a bad thing

There's sometimes a perception that taking business finance is a sign something has gone wrong.

In reality, many successful businesses use borrowing strategically.

A loan can help you invest in equipment, buy stock ahead of a busy period, hire new employees or bridge a temporary cash flow gap.

The important question isn't whether you're borrowing. It's whether the borrowing helps your business grow or become more resilient.

Understanding the interest rate environment helps you make that decision with your eyes open.

So should you be doing anything right now?

Not necessarily.

But a rate announcement is a useful reminder to review a few things:

• How much are you paying for any existing borrowing?
• Are you expecting any large expenses over the next 12 months?
• Do you have sufficient cash reserves if trading conditions change?
• Are there opportunities you've been delaying because of funding concerns?

You don't need to become an economist. You just need to understand how the wider environment could affect your business.