How to compare business loan offers when there's no comparison rate

Two lenders offer you $100,000 for a new machine. One has lower repayments. The other has fewer fees. A third is pitched by the supplier and sounds easy. Which is cheapest? Without a comparison rate to lean on, most owners guess, and the guess is often wrong. Here’s a method that works for any business loan, from a small unsecured loan to a property-backed facility.

Why is comparing business loans so hard?

Three reasons:

1. No comparison rate. Business credit falls mainly outside the National Credit Code, so lenders aren’t required to show one.
2. Different fee structures. Some load costs upfront, some spread them through the term, some hide them at the exit.
3. Different shapes. Weekly versus monthly repayments, balloons, prepaid interest and redraw all change the picture.

The Reserve Bank’s October 2025 review of small business finance found about one in five small businesses report difficulty getting finance, with finding a suitable price among the reasons. A clear comparison method makes that part easier.

Step 1: Get every offer in writing

Ask each lender for:

• The loan amount and the cash you’ll actually receive after any deductions.
• The repayment amount and frequency and the number of repayments.
• Every fee: establishment, application, ongoing or line fees, legal, registration, valuation or assessment.
• Any balloon, residual or prepaid interest.
• Early repayment terms and charges.
• Default fees and charges.
• The security and guarantees required.

If an offer can’t be put in writing, it can’t be compared.

Step 2: Work out the total cost in dollars

For each offer:

Total cost = (repayment × number of repayments) + balloon + all fees not already included − cash you actually receive

That one number captures interest and fees together. It’s the closest thing business borrowers have to a comparison rate, and it’s easier to understand.

Step 3: Adjust for the term you’ll really keep it

Many business loans are repaid early: a contract pays out, a property sells, the business refinances. If you expect to repay early, recalculate:

• Total repayments made up to that point.
• Plus the payout amount at that point.
• Plus any early repayment or exit fee.
• Minus the cash you received.

A loan that looks cheapest over five years can be dearest over eighteen months because of a hefty exit fee, and the reverse is common too.

Step 4: Check the shape fits your cash flow

Cost isn’t everything. A slightly dearer loan with the right shape can be the better choice.

Feature	Questions to ask
Repayment frequency	Does it match how money comes in?
Term	Does it end before the purchase stops earning?
Balloon	Will the asset be worth more than the balloon when it’s due?
Flexibility	Can you make extra repayments or redraw?
Security	Is your home or the asset on the line, and is that proportionate?
Guarantees	Who’s personally liable?

Step 5: Weigh it against what the purchase earns

The cost of finance only means something next to the benefit of the purchase. Put the price, the total finance cost and the expected monthly benefit into our purchase payback calculator. If the purchase pays back comfortably either way, choose the offer with the best shape. If it’s tight, total cost becomes the deciding factor.

A worked example

Illustrative figures only. A Hobart joinery business needs $100,000 for a CNC router and compares three offers:

	Offer A	Offer B	Offer C
Cash received	$97,500 (fee deducted)	$100,000	$100,000
Repayments	60 monthly	36 monthly	156 weekly
Total of repayments	$131,000	$121,500	$124,800
Other fees	$0	$1,200	$600
Balloon	$0	$0	$0
Total cost over full term	$33,500	$22,700	$25,400
Exit fee if repaid at 18 months	Large	None	Moderate

Offer A has the lowest repayments but costs the most. Offer B costs least and has no exit fee, which matters because the business expects a large contract payment within 18 months. Offer C’s weekly repayments look smaller but don’t match the joinery’s monthly client payments. The business chooses B, after checking the bigger monthly repayment fits its slowest month.

What questions should you ask every lender?

• What’s the total I’ll repay, including every fee?
• How much will actually land in my account?
• What happens if I repay early, and what will it cost?
• What happens if I miss a payment?
• What security and guarantees do you need?
• Which external dispute resolution scheme do you belong to?

The Australian Financial Complaints Authority handles complaints from small businesses with fewer than 100 employees for free, though credit facilities over $5 million fall outside its limits.

What mistakes should you avoid?

• Comparing repayments instead of totals. Longer terms always look cheaper per repayment.
• Forgetting deducted fees. Borrowing $100,000 and receiving $96,000 changes the maths.
• Ignoring exit fees when you’re likely to repay early.
• Applying everywhere at once. Multiple formal applications can add enquiries to your credit file.
• Letting a supplier’s convenience decide. Supplier finance can be fine, but compare it like any other.

Our guide to business loan costs lists the fees to ask about, and what lenders check before funding a purchase helps you prepare.

How should you weigh security and guarantees?

Two offers with similar costs can carry very different risk. An unsecured loan with a director’s guarantee and a loan secured over your home are not equivalent, even at the same price. Ask yourself what’s on the line if things go wrong, and whether that’s proportionate to the purchase. For a modest amount, keeping the family home out of it may be worth a slightly higher cost.

Keep a simple comparison sheet

Before you speak to lenders, set up a one-page sheet with a column for each offer and rows for: cash received, repayment amount and frequency, number of repayments, every fee, balloon, total repaid, total cost, exit fee, security and guarantees. Fill it in as each offer arrives. It takes ten minutes, stops you comparing apples with oranges, and gives you a clear record to discuss with your accountant before you sign anything.

Want offers you can actually compare?

We’ll put the numbers in front of you plainly, in dollars. Asking us leaves your credit file untouched; a check only comes up once you choose to proceed. We don’t push your enquiry to a pile of lenders. A real person looks at what you’re buying and the business behind it, and calls you to walk through options and their full cost.

Please answer the form accurately, especially the amount, the purchase and your turnover, so the first options we show are ones you can rely on. Get options you can compare.