What does a business loan really cost?

What goes into the true cost of a business loan?

The true cost is everything you pay beyond the amount you borrow. Break it into four buckets:

Bucket	What it includes	When it’s paid
Interest	The charge for using the money	Over the life of the loan, or capitalised into it
Upfront fees	Establishment, application, valuation, legal, registration	At or before settlement, often deducted from the advance
Ongoing fees	Account keeping, line fees on undrawn limits	Monthly or annually
Exit costs	Discharge fees, early repayment costs, break costs	When the loan is repaid

Add them together in dollars for the period you’ll actually hold the loan. That number — the total cost of finance — is the only fair way to compare two offers.

Why doesn’t this site publish rates?

Because a published figure can’t tell you what your business will pay. Every loan is priced on the individual situation: the security, the purpose, the term, the trading pattern and the credit history. A headline “from” figure is usually reachable by only a small slice of applicants and sets expectations that don’t survive contact with the real assessment.

Instead, we focus on what you can control: understanding the cost buckets, asking for everything in writing, and comparing in dollars.

Which fees are specific to property-secured loans?

Securing a loan over property adds real work, and that work has costs:

• Valuation — the lender’s assessment of the property.
• Legal and documentation — preparing and reviewing the mortgage or caveat and guarantees.
• Title searches and registration — lodging the lender’s interest with the state land registry.
• Discharge — removing the mortgage or caveat when the loan is repaid.

These are part of why property-secured loans suit larger amounts. On a small, short need, the fixed costs of security can outweigh the benefit — one reason unsecured options exist. See secured or unsecured for the full comparison.

How should I compare two offers? (Illustrative example)

Illustrative only. Figures are invented to show the method, not to represent any lender’s pricing.

A café owner needs $80,000 for eight months until an insurance claim pays out.

	Offer A	Offer B
Upfront fees	$2,400	$900
Interest over 8 months	$7,200	$8,100
Early repayment cost if repaid at month 5	$0	$1,500
Total if held 8 months	$9,600	$9,000
Total if repaid at month 5	$6,900	$7,462 (approx.)

Offer B looks cheaper over the full term. But the claim is likely to pay at month five, and Offer A has no early repayment cost — making A cheaper in the most likely scenario. The lesson: model the cost over the period you’ll really hold the loan. Our page on repaying early covers what to ask.

How do I weigh cost against value?

A loan is worth its cost when it saves or earns more than it costs, or prevents something worse. A few examples of the trade-off:

• Tax debt. The ATO’s general interest charge compounds daily, and from 1 July 2025 it’s no longer tax deductible. Clearing a debt with a loan may or may not cost less overall — run the numbers. See using a loan to pay tax or BAS.
• Stock or equipment that lets you fulfil a profitable order.
• Refinancing several expensive facilities into one lower total repayment.

If a real person working through those numbers with you would help, start a 60-second enquiry — no credit check at that stage.

What questions should I ask about cost before signing?

• What is every fee, in dollars, and when is each paid?
• Is interest charged on the full amount from day one, or only on what’s drawn?
• What does it cost to repay early — at month three, six or twelve?
• Are fees deducted from the loan amount, so less reaches my account?
• What happens, and what does it cost, if I need a short extension?
• What’s the total I will have paid if I hold the loan for the period I expect?

The guide questions to ask any business lender goes deeper.

How does the term change the total cost?

Term is the lever people most often overlook. A longer term lowers each repayment, which helps cash flow, but it usually increases the total interest paid because you’re holding the money for longer. A shorter term does the opposite: bigger repayments, smaller total.

The sweet spot is the shortest term whose repayments your business can carry comfortably in a slow month, with enough flexibility to repay early if things go better than expected. Three practical checks:

• Match the term to the purpose. A stock order that sells through in four months doesn’t need a three-year loan; a fit-out that pays back over several years probably shouldn’t be squeezed into six months.
• Check flexibility. If there’s a real chance you’ll repay early, favour a loan where that’s cheap or free.
• Check the end point. For short-term loans, know exactly how the balance will be cleared at the end — trading income, a sale, a refinance or a receivable.

For how different repayment structures work, see how business loan repayments work.

Is the cheapest-looking loan a trap?

Sometimes. Watch for:

• Low upfront fees balanced by high exit costs.
• Short terms that force a costly refinance.
• Undrawn line fees on limits you’ll never use.
• Unclear default charges if a repayment is late.

None of these are unusual in themselves; they only become a problem when they’re not understood before signing.

Get a real price for your real situation

The only price that matters is the one for your business. Enquiring doesn’t involve a credit check, your enquiry isn’t sprayed out to a pile of lenders, and a real person explains every cost in plain dollars before you commit to anything. Fill in the form carefully — amount, purpose, term and security — so the pricing you hear reflects the loan you’ll actually get.

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