14 questions to ask before you sign a business loan offer

Why the letter of offer deserves your full attention

By the time an offer arrives, most owners are relieved and keen to get it done. That’s exactly when mistakes happen. The letter of offer — and the loan agreement behind it — is where the real deal lives: not the conversation, not the brochure, not what you assumed. Once you sign, those pages are what count.

business.gov.au’s advice before applying includes checking the lender is legitimate, understanding your finances and knowing the maximum repayment you can afford. Here’s Mr’s checklist for the moment after: when the offer is on the table and the pen is nearby.

Part 1: The money

1. What’s the total cost in dollars?

Not the rate, the dollars. Ask the lender, or work it out: every scheduled repayment, plus every fee, minus the amount you receive. That’s the true cost of the money. Mr explains each fee type on what a business loan actually costs.

2. How much will actually land in my account?

Some fees are deducted from the loan at settlement. If you borrow $200k and $8k of costs come out upfront, you receive $192k. Make sure the net amount still covers what you need — especially if you’re paying a fixed bill like a tax debt or a settlement.

3. What’s the repayment schedule, exactly?

Weekly, fortnightly or monthly? Principal and interest, or interest-only? Is there a lump sum (balloon) at the end? Line the repayment dates up against your cash flow — wages, BAS, rent and, since 1 July 2026, super each payday.

4. Is the price fixed or can it change?

If the cost can move during the term, ask what it’s linked to and how you’ll be told.

Part 2: The security and guarantees

5. Exactly what security am I giving?

Which property, which assets, registered how — first mortgage, second mortgage, caveat, a charge over business assets? Is it limited to this loan or does it secure “all money” you owe that lender, now and in the future? An “all money” clause can tie up a property far longer than you expect.

6. Who has to guarantee, and for how much?

Every director? A spouse who co-owns the home? Is the guarantee limited to a dollar amount or unlimited? Is it “joint and several”, meaning the lender can pursue any one guarantor for the whole debt? Read whether you’ll need to sign a personal guarantee before this conversation.

7. How is the security released?

When the loan is repaid, what’s the process and cost to discharge the mortgage or withdraw the caveat? How long does it take? If you plan to sell the property to repay, make sure the timing works.

Part 3: The conditions

8. What covenants am I agreeing to?

Covenants are promises in the agreement: keep insurance current, provide financial statements each year, don’t take on more debt without consent, don’t change ownership, keep the business operating. Breaking one can be a default even if every repayment is on time. Ask for a plain list.

9. What do I need to report, and when?

Annual financials? Quarterly BAS copies? Notice of any ATO debt? Put the dates in your calendar on day one. Late reporting is an avoidable breach.

10. What conditions must be met before settlement?

Valuation, documents, insurance certificates, payout figures from other lenders, legal advice certificates for guarantors. Each one is a potential delay. Get the list early and start on it immediately.

Part 4: The what-ifs

11. What if I want to repay early?

Is there an early repayment fee or break cost? Is there a minimum term or minimum interest? If you’re expecting a sale, a refund or a big payment to clear the loan early, this question can change which offer is cheapest.

12. What if I’m late — or the exit is delayed?

What counts as default? Is there default interest, and how much more does it cost? Is there a grace period? For short-term and caveat loans, ask specifically what happens if the term runs past its end date: is an extension possible, and what does it cost?

13. What can the lender do if things go wrong?

What notice will you receive? When can the lender call in the whole loan? When can it enforce its security? You don’t sign a loan expecting this; you ask so there are no surprises if life intervenes.

14. Who do I talk to during the loan?

A named contact, a phone number, a process for hardship requests. If something goes wrong in month seven, you want to know who to call in day one.

How to use the answers

Write the answers down next to each question, ideally confirmed by email. Then ask yourself three things:

1. Can the business carry this in an ordinary month — not just a good one?
2. Am I comfortable with what happens to my property and guarantees in the worst case?
3. Is the cost worth it compared with not borrowing?

If you can answer yes to all three, sign with confidence. If not, keep talking — or walk away.

An illustrative example

A Perth printing company receives two offers for a $180k facility. Offer A has lower ongoing costs but an “all money” mortgage over the director’s home, unlimited guarantees from both directors and a break cost for repaying within two years. Offer B costs a little more each month, is secured only for this loan, caps one director’s guarantee and has no early repayment fee. The directors expect to sell an unused property within a year and repay. On total dollars and risk, Offer B wins — even though Offer A looked cheaper on the first page.

Illustrative only.

Don’t skip the legal advice

For larger loans, anything secured over your home and any personal guarantee, Mr’s advice is to have a solicitor read the documents. Lenders often require independent legal advice for guarantors who aren’t borrowers — for example, a spouse who co-owns the home. That’s protection for them, not a formality.

Decode as you read

Letters of offer are written in a dialect of their own. Keep Mr’s loan jargon decoder open in another tab, and read business loan jargon explained for how the terms fit together.

What red flags should make me pause?

Most lenders are straightforward, but a few signs deserve a hard look before you go further:

• Large fees demanded before any assessment — especially “guaranteed approval” fees.
• Pressure to sign today, with no time to read the documents or take advice.
• Blank spaces in documents you’re asked to sign.
• Terms that differ from what you were told on the phone, with no explanation.
• Reluctance to put costs in writing.
• No clear lender identity — you can’t tell who is actually lending the money.

business.gov.au suggests checking a lender’s legitimacy before you deal with them. A legitimate lender won’t mind you taking a day to read, ask questions and get advice.

How long should I take to review an offer?

Long enough to read every page and get answers to anything unclear. For a straightforward unsecured loan, that might be an evening. For a property-secured loan with guarantees, allow time for a solicitor’s review and for each guarantor to get advice. If you’re up against a deadline, tell the lender at the start so documents arrive with enough time to read them — a rushed signature is the most expensive kind.

Want an offer worth reading this closely?

Start with a lender that suits your situation. Ask Mr in about 60 seconds — what you need, what it’s for and what security you can offer. There’s no credit check to enquire, your details aren’t sprayed around a list of lenders, and a real person will walk you through any offer before you sign, fees and fine print included. Accurate details on the form mean the offers you get are ones you’d actually consider. See if you qualify.