Not everyone can borrow at any price. Some people cannot borrow at all, because the lender will not take them on as a customer.
Access to credit is a gating mechanism that separates those who can build, invest, and scale from those whose projects die in conception because no one will lend them money. It is not the same as the price of credit (the interest rate), though both matter. A lender can theoretically price interest rates so high that the expected return makes a loan worthwhile even if the borrower is likely to default. But empirically, lenders do not raise rates indefinitely. Instead, they ration credit, refusing outright to lend to certain borrowers even when those borrowers would accept higher interest rates. This is not a market failure, but a rational response to a fundamental problem: the lender cannot easily verify whether a borrower will actually repay.
The mechanism behind credit rationing is information asymmetry. When a borrower knows more about their own risk of default than the lender does, the lender faces adverse selection: the borrowers most willing to accept high rates may be the ones most likely to fail. Raising the interest rate does not solve this problem. It makes it worse, because it pushes marginal, risky borrowers into the pool while driving out safer ones who cannot afford the higher rate. At some point, the lender simply stops lending to that category of borrower altogether. A young entrepreneur with no track record, a neighborhood with a history of economic decline, a minority group facing statistical discrimination by lenders, all face hard cutoffs in access to credit regardless of the actual interest rate offered. This gatekeeping is not accidental. It is a fundamental feature of how credit markets allocate capital, and it concentrates economic power in the hands of those trusted by lenders and denies it to everyone else.
Source: Stiglitz, J.E. & Weiss, A. (1981), “Credit Rationing in Markets with Imperfect Information,” American Economic Review, 71(3), 393-410. Winner of the Nobel Prize in Economic Sciences (Stiglitz, 2001).