Quick answer
A business loan costs you interest plus fees. Interest is the lender's charge for using its money, calculated on what you owe. Fees can include an establishment fee, and for property-secured loans, valuation and legal costs. Every loan is priced on the borrower's circumstances, so the clearest way to compare offers is to add up the total dollars you'll repay over the whole term.
Key points
- The cost of a loan = interest + fees.
- Pricing depends on your situation: amount, term, security, history and records.
- Compare offers by the total dollars repaid, not a single headline number.
- A shorter term often means less total cost but bigger repayments.
- Two parts of cost
- Interest + fees
- Best comparison
- Total dollars repaid
- Priced on
- Your circumstances
People often ask the cost question first, and fair enough: you want to know what you’re signing up for. The honest answer is “it depends”, but that’s not very helpful on its own. So this lesson explains what you pay for, why it varies, and how to compare offers so you can spot a good one.
What are you actually paying for?
Every business loan has two kinds of cost.
1. Interest. This is what the lender charges for letting you use its money. It’s worked out on the balance you owe, so as you repay the loan, the interest portion usually shrinks.
2. Fees. These are charges for specific things. Common ones include:
| Fee | What it’s for | When you might see it |
|---|---|---|
| Establishment fee | Setting up, assessing and documenting the loan | Most loans |
| Valuation fee | Checking what a property is worth | Property-secured loans |
| Legal or documentation fees | Preparing mortgage or loan documents | Mostly property-secured loans |
| Line fee | Keeping a credit limit available | Lines of credit |
| Early repayment or break costs | Ending the loan before the agreed term | Some loans |
| Late payment fee | Missed or late repayments | Most loans |
Not every loan has every fee. The point is to know the names, so nothing in an offer surprises you. If a term is unfamiliar, the jargon buster has a plain-English translation.
Why does the price change from business to business?
This is the bit that frustrates first-timers: why can’t someone just tell you the price? Because the price is the lender’s view of the risk and effort in your loan. The main things that move it are:
- How much you borrow and for how long. Larger or longer loans involve more risk and more total interest.
- Security. A loan backed by property gives the lender a safety net, which changes the pricing.
- Trading history. A business with two steady years looks different from one that opened last spring.
- Credit history. A clean record helps. Bumps don’t rule you out, but they affect pricing.
- How clear your records are. Tidy bank statements and up-to-date BAS make a lender’s job easier.
That’s why this site never publishes a rate. Every loan is priced on the client’s own circumstances, and the aim is always the sharpest price available for your situation.
How do you compare two loan offers?
Here’s the simplest method, and it works even if you hate numbers. Ask every lender the same question:
“Over the whole life of this loan, how many dollars will I pay back in total, including every fee?”
Then line the offers up.
Illustrative example. Imagine a small bakery wants $60,000 for a new oven and fit-out. (Figures are made up to show the method, not real offers.)
| Offer A | Offer B | |
|---|---|---|
| Amount received | $60,000 | $60,000 |
| Term | 3 years | 2 years |
| Repayments | Monthly | Weekly |
| Establishment fee | Added to the loan | Paid upfront |
| Total repaid (interest + all fees) | $78,400 | $72,900 |
| Early payout allowed? | Yes, small fee | Yes, no fee |
Offer B costs less in total dollars, but its weekly repayments are bigger because the term is shorter. Offer A costs more overall but is gentler on weekly cash flow. Neither is automatically “right”. The right one is the one your cash flow can comfortably carry. Lesson four explains how repayments work so you can judge that.
If you’d like someone to do this comparison with you for real, start a quick enquiry. A real person will talk you through the total cost of each option, and asking doesn’t involve a credit check.
What questions should you ask about cost?
Keep this list handy for any lender conversation:
- What is the total I’ll repay, in dollars, including all fees?
- Is the establishment fee taken out of the loan, added to it, or paid upfront?
- Are there any ongoing fees (monthly, annual or line fees)?
- What happens if I want to pay the loan off early?
- What happens if I’m late with a repayment?
- Are there costs I’ll pay even if the loan doesn’t go ahead, such as a valuation?
A good lender or broker answers every one of these without fuss.
Is the cheapest loan always the best loan?
Not always. Cost matters, but so do:
- Repayment size. A cheaper loan with repayments your cash flow can’t handle is a bad fit.
- Flexibility. Can you pay extra? Redraw? Pay out early without a big fee?
- Fit for purpose. A line of credit for a short, repeating cash gap can make more sense than a lump-sum loan, even if the costs look different.
Think of it like buying a ute. The cheapest one isn’t the best buy if it can’t carry your tools.
Quick check: can you explain the cost?
Before you sign any loan, try saying these three things out loud in your own words. If you can, you understand the cost well enough to decide.
- “In total, I’ll repay about $___ over ___ months or years.”
- “The fees are ___, and they’re paid ___ (upfront, from the loan, or added to it).”
- “If I pay it off early, I’ll pay ___.”
Can’t fill in a blank? That’s the question to ask next. It’s also worth testing the repayment against your slowest month, using the method in can you afford the repayments.
Want to see real numbers for your business?
Understanding cost in theory is useful. Seeing it for your own business is better. That starts with a short, 60-second enquiry.
There’s no credit check to ask. Your details aren’t broadcast to a list of lenders hoping for a match; they stay with the person looking after you. That person explains what each option would cost in total dollars, in plain English. Please answer the form carefully, because the more accurate your answers, the more accurate the pricing conversation.
Frequently asked questions
Why don't you publish interest rates?
Because every business loan is priced on the borrower's own situation: amount, term, security, trading history and credit. A published number would be wrong for most people. We'd rather show you real options for your business than an advertised figure you might not get.
What is an establishment fee?
It's a one-off fee for setting up the loan, covering the lender's work to assess and document it. It may be paid upfront or added to the loan. Ask whether it's included in the amount you'll receive or taken out of it.
Are business loan costs tax deductible?
Interest and some borrowing costs on money used for business purposes are often deductible, but it depends on your situation. Ask your accountant or registered tax agent before you rely on it.
Can I pay a loan off early to save money?
Often you can, but some loans have early repayment fees or charge a set amount of interest regardless. Ask the question before you sign, not after.
What's the easiest way to compare two offers?
Ask each lender for the total amount you'll repay over the whole term, including all fees. Then compare those totals along with the repayment size and how flexible each loan is.