Quick answer
A business loan's cost is everything you pay over and above the amount borrowed: interest, establishment and application fees, ongoing or line fees, legal and registration costs, and any early repayment or exit charges. Business loans aren't required to show a comparison rate, so the clearest way to compare offers is the total dollar cost over the term you'll actually keep the loan, set against what the purchase earns.
Key points
- Compare offers by total dollars repaid, not the headline number.
- Ask about every fee: establishment, ongoing, legal, registration and exit.
- Pricing depends on security, term, credit history and the strength of the business.
- Early repayment can save a lot or almost nothing, depending on the contract.
- Main cost drivers
- Security, term, credit history, cash flow
- Best comparison
- Total dollars repaid over the real term
- Watch for
- Exit fees, line fees, prepaid interest
- Our approach
- Each loan priced on the business's situation
Two loans for the same $100,000 can cost wildly different amounts, and the one with the smaller repayment isn’t always the cheaper one. Business loan pricing has more moving parts than a home loan, fewer rules about how it’s shown, and plenty of fees that only appear in the fine print. This page explains how pricing works so you can compare offers on the only number that matters: what the money costs you in dollars.
What makes up the cost of a business loan?
Everything you pay above the amount borrowed. The usual pieces:
| Cost | When it’s paid | What to ask |
|---|---|---|
| Interest | Through the term, or upfront on some loans | Is it charged on the full amount or the reducing balance? |
| Establishment or application fee | At settlement | Is it deducted from the loan or paid separately? |
| Ongoing or line fee | Monthly or yearly | Charged on the drawn amount or the whole limit? |
| Legal and settlement costs | At settlement | Are the lender’s legal fees passed on? |
| Property assessment and registration | Secured loans, at settlement | Who orders it and what does it cost? |
| Early repayment or exit fee | If you repay early | Does paying early actually reduce the total? |
| Default and dishonour fees | If a payment is missed | What does a missed payment cost? |
Business loans aren’t required to show a comparison rate, because credit used mainly for business purposes falls outside the National Credit Code. So the job of adding everything up falls to you, or to us.
Why does pricing vary so much?
Lenders price on risk and effort. The main drivers:
- Security. Property behind a loan usually brings the cost down. Unsecured lending costs more.
- Term. Very short loans often carry higher pricing because fixed costs are spread over less time.
- Credit history. Defaults or ATO debt add risk and often cost. See bad credit business loans.
- Paperwork. Full financials can earn sharper pricing than low doc evidence.
- The business. Strong, steady cash flow is the best negotiating position there is.
That’s why Loanster doesn’t publish rates. A number on a website is right for almost nobody.
How do you compare two offers properly?
Use the same yardstick for every offer:
- Total repaid. Add every repayment over the term to every fee. Subtract the amount you actually receive. That’s the cost.
- Cash received. If fees or prepaid interest are deducted at settlement, you get less than the loan amount.
- Real term. If you’ll probably repay early, work out the cost to that point, including exit fees.
- Repayment rhythm. Weekly debits from a business with monthly income can hurt even when the total is lower.
- Flexibility. Redraw, extra repayments, the ability to pause. Worth something, but put a dollar figure on it.
Our guide to comparing business loan offers has a worked example and a checklist you can take to any lender.
How should cost relate to what you’re buying?
The cost of a loan only means something next to what the purchase earns. A $14,000 total cost is expensive for a fit-out that adds nothing to sales, and cheap for a machine that adds $5,000 a month in margin. Before you sign, put the purchase price, the total cost of finance and the expected monthly benefit into our purchase payback calculator.
Illustrative example. A Canberra print shop is offered two loans for a $120,000 press. Offer A has lower repayments over five years, a $2,500 establishment fee and a large break fee. Offer B repays over three years with a $900 fee and no exit charge. Adding everything up, B costs about $9,000 less in total and the shop expects to refinance or clear the loan early when a big government contract pays. The bigger repayment is worth it.
Where do you go if something goes wrong?
Small businesses with fewer than 100 employees can take complaints about financial firms to the Australian Financial Complaints Authority for free, though credit facilities over $5 million fall outside its limits. Ask any lender which dispute scheme it belongs to before you sign.
Which costs can you negotiate?
Not everything is fixed. Depending on the lender and your position, these are often worth raising:
- Establishment fees, especially on larger or secured loans.
- Exit and early repayment fees, if you expect to repay early.
- Line fees on unused limits.
- Term, to better match the purchase’s working life.
- Security, such as whether a property is needed at all for a modest amount.
Your best negotiating position is a clean, well-prepared application and a strong business. Having a genuine alternative offer helps too.
Want the real numbers for your purchase?
Every business is priced differently, so the only useful number is yours. Asking us doesn’t involve a credit check; that only happens once you choose to go ahead. We won’t spray your details across a list of lenders to see who bites. A real person looks at the purchase and the business, and calls you with options and their full cost in dollars.
Fill in the form carefully, especially the amount, what you’re buying and any property, and we can price it properly first time. Get the real cost for your purchase.
Frequently asked questions
Why don't business loans show a comparison rate?
Credit used mainly for business purposes sits outside the National Credit Code, which is where comparison rate rules come from. That's why you need to ask lenders for the full cost in dollars and compare it yourself.
What fees should I ask about?
Establishment or application fees, ongoing account or line fees, legal and settlement costs, property assessment or valuation costs for secured loans, registration fees, broker fees if any, early repayment charges and default fees. Get them in writing.
Is a longer term cheaper?
Each repayment is smaller, but you usually pay more in total because interest runs longer. The sweet spot is a term that matches how long the purchase earns money, so you're not still paying for something you've stopped using.
What is prepaid or capitalised interest?
On some short-term secured loans, interest for part or all of the term is taken upfront from the loan or added to the balance. It means no monthly repayments, but you receive less cash or owe more at the end. Factor it into the total.
Why won't you just tell me your rates?
Because every loan is priced on the individual business: the security, the term, the credit history and the purchase. A published number would be wrong for most people. We give you the real cost once we understand your situation.