What does a business loan actually cost?

Why doesn’t Mr just tell me the rate?

Because a rate on its own is the least useful number in the conversation.

Two loans with the same headline rate can cost very different amounts once fees, the term and the repayment pattern are added. And the rate itself depends on things only an assessment can settle: the security, how long you’ve traded, how steady your turnover is, your credit and ATO position, the purpose of the loan and how long you need the money. A number published on a website would be wrong for most people reading it.

What Mr can do is show you every piece of the price, so you can ask the right questions and compare offers properly.

What are the pieces of the price?

Cost	What it is	When it applies
Interest	The charge for using the money over time	Every loan
Establishment or application fee	Setting up and assessing the loan	Usually at the start
Legal and documentation costs	Preparing loan and security documents	Mostly secured loans
Valuation or property report	Independent view of the property’s worth	Property-secured loans
Registration and title costs	Registering a mortgage or lodging a caveat	Secured loans
Line fee	Keeping a limit available	Lines of credit
Account or monthly fee	Ongoing administration	Some facilities
Early repayment or break cost	Paying off before the agreed date	Some loans
Discharge or caveat withdrawal fee	Removing the security at the end	Secured loans
Default interest and fees	Charges if payments are late or the term overruns	Only if things slip

Not every loan has every cost. But you should know which ones yours has before you sign.

How do I compare two offers properly?

Turn everything into dollars over the life of the loan.

1. Total repayments — add up every scheduled repayment.
2. Plus upfront costs — establishment, legal, valuation, registration.
3. Plus ongoing fees — line fees, monthly fees.
4. Plus exit costs — discharge fees, and early repayment costs if you’re likely to pay out early.
5. Minus the amount borrowed — what’s left is the true cost of the money.

Then ask the “what if” questions. What if you repay three months early? What if the exit is a month late? What does each lender charge in those cases?

An illustrative example. Offer A has a lower interest cost but a large establishment fee and a break cost. Offer B costs more in interest but has small fees and nothing to pay if you repay early. If you expect a property sale to repay the loan within six months, Offer B may well be cheaper in dollars, despite looking dearer on the headline.

Why do short loans look expensive?

Because fixed costs get spread over fewer months. A legal fee or establishment fee that barely registers on a five-year loan stands out on a four-month one. That’s one reason a caveat loan should be kept short and specific — the longer it runs past its purpose, the worse the value.

What pushes the price up or down?

Tends to help	Tends to cost more
Property security with a healthy cushion	No security, or thin equity
Two-plus years of steady trading	Short or volatile trading history
Clean credit file	Recent defaults or judgments
Lodged BAS, ATO plan in place	Unlodged statements, no ATO plan
Clear purpose and exit	Vague purpose, no exit
Time to arrange	Very tight deadline

You can’t fix all of these overnight, but some — lodgements, a clear purpose, organised documents — are within your control this week.

What’s the cost of not borrowing?

This is the other half of the sum, and it’s often skipped. If a loan lets you take a supplier’s early-payment discount, avoid a director penalty, keep a contract, or buy stock at a clearance price, the benefit can outweigh the cost. If it just postpones a problem, it can’t.

Ask yourself: what does this money earn or save, and when? If you can’t answer that, slow down.

What about tax?

Interest and many borrowing costs on money used for your business are generally deductible, but there’s detail — read whether a business loan is tax deductible and check with your accountant.

What should I ask before signing?

Our guide to questions to ask before signing a loan offer has the full list. The short version: ask for every fee in writing, ask what happens if you repay early or late, and ask what the total dollar cost is under each scenario. If a term in the offer is unfamiliar, the jargon decoder will translate it.

How do I ask for costs without seeming difficult?

You won’t seem difficult. A lender or specialist who’s comfortable with their pricing will happily put it in writing. Useful phrasing:

• “Can you list every fee on this loan, when it’s charged and how much it is?”
• “What’s the total I’ll repay over the full term, including fees?”
• “If I repay after six months, what would the payout figure include?”
• “Is anything deducted from the loan amount at settlement?”
• “What changes if a repayment is late?”

Write the answers in a simple table for each offer. The comparison usually becomes obvious once everything is in dollars side by side.

Are there costs outside the loan itself?

Sometimes. Your own solicitor or accountant may charge to review documents. A property owner who isn’t a borrower may need independent legal advice. If an existing lender has to be paid out or consent to a second mortgage, it may charge its own fee. None of these is unusual — just make sure they’re in your budget, so the amount you receive covers the job you’re borrowing for.

Want real numbers for your situation?

They start with a real conversation. Ask Mr in about 60 seconds — what you need, what it’s for and what you can offer as security. There’s no credit check to enquire, your enquiry isn’t fired off to a pile of lenders, and a real person will explain the full cost of the options that fit, fees and all, before you decide anything. Accurate details on the form mean accurate figures on the call. See if you qualify.