How to read a business loan offer, in three passes

Why do business loan offers feel so hard to compare?

Because they’re built differently. One offer quotes a weekly repayment over 12 months. Another quotes a monthly repayment over three years with a balloon. A third is a merchant cash advance with a percentage of daily card sales. Each one looks reasonable on its own. Side by side, they’re almost impossible to compare at a glance.

The fix is to read every offer the same way, in three passes. Each pass asks a different question. By the end, you’ll know what each offer really costs, what it asks of you and what happens if things change. That’s enough to choose well.

We don’t publish rates, because every loan is priced on the business’s circumstances. This guide is about understanding what you’ve been offered, whatever the price.

Pass 1: what will this loan really cost?

Start with money. Grab a calculator, or a spreadsheet, and add up every dollar you’ll pay beyond the amount you borrow.

The cost checklist

Cost	Where to find it	Notes
Interest or finance charges	Repayment schedule or cost summary	Over the whole term
Establishment or application fee	Fees section	Often deducted from the loan
Ongoing account or line fees	Fees section	Monthly or annual
Valuation and legal fees	Property-secured loans	Sometimes paid upfront
Brokerage or arrangement fees	Fees or disclosure section	Ask if not shown
Discharge or exit fees	End of loan section	Charged when you repay
Balloon or residual	Repayment schedule	A lump sum due at the end

Add them all up. That’s the total cost of finance. Then divide by the number of months you’ll have the money. Now you can compare offers fairly.

Watch the amount you actually receive

If fees are deducted from the loan, you’ll receive less than the headline amount. A loan of a certain size with a large establishment fee deducted might leave you short of what you actually need. Check the “amount financed” or “net amount advanced” line.

Compare like with like

When comparing two offers, compare:

• Total cost of finance, in dollars
• Amount you receive, after deductions
• How long you have the money

A short loan with a modest total cost can be more expensive per month than a longer one, and vice versa. Neither is automatically better; it depends on how long you need the money.

Pass 2: what’s the structure, and does it fit?

Now look at how the loan works day to day.

The core terms

• Amount. Is it what you asked for, and enough for the purpose plus a buffer?
• Term. How long until it’s fully repaid? Does that match the purpose? A long-lived asset suits a longer term; a short timing gap suits a short one.
• Repayment frequency. Daily, weekly, fortnightly or monthly? Match it to how your income arrives.
• Repayment type. Principal and interest, interest-only for a period, or a balloon at the end?
• Fixed or variable. Can the cost change during the term?

Security and guarantees

• What’s the security? Property, equipment, a caveat, a general security agreement over business assets, or nothing?
• Is anything registered? Lenders often register security interests over business assets on the Personal Property Securities Register, which records security interests in personal property such as vehicles, equipment, stock and debts.
• Who’s guaranteeing? Directors, owners, family members? Each guarantor is personally responsible.

If security over a family home is involved, every owner needs to understand the risk, and independent legal advice is wise. Our secured vs unsecured comparison explains the trade-offs.

The fit test

Go back to the three questions from our guide on what to answer before any business loan. Does this structure match the purpose, the repayment source and your appetite for risk? If not, ask whether it can be adjusted.

Want a specialist to look over the structure with you? Send a 60-second enquiry and we’ll call. There’s no credit check to ask.

Pass 3: what happens if things change?

The final pass covers the clauses most people skip. They matter most when life doesn’t go to plan.

Early repayment

If business booms or a property sells early, can you repay the loan sooner? Look for:

• Early repayment fees or break costs
• Minimum interest periods, where you pay a set amount of interest even if you repay early
• Partial repayment rules, such as whether extra repayments are allowed

Extensions and rollovers

For short-term, bridging and caveat loans, the exit might run late. What happens then?

• Is an extension available, and what does it cost?
• How much notice do you need to give?
• Is an extension at the lender’s discretion?

Default and arrears

• What counts as a default? Not just missed payments. Some contracts include events like a change of directors, a new tax debt or breaching a condition.
• Default charges. Higher charges that apply while you’re in default.
• Enforcement. What the lender can do, and when.

Conditions and covenants

Some loans include ongoing conditions:

• Providing financial statements each year
• Maintaining insurance on secured assets
• Not taking on further debt without consent
• Keeping certain financial ratios

Make sure you can meet them, and note any reporting dates in your calendar.

An illustrative comparison

Illustrative only. An events-hire business receives two offers for the same purpose.

Offer A is a short unsecured loan with weekly repayments. The weekly amount looks manageable, but adding the establishment fee and all repayments shows a relatively high total cost for the time the money is held. There’s an early repayment fee.

Offer B is a longer loan secured over the owner’s investment property, with monthly repayments, valuation and legal fees upfront, and no early repayment fee.

Reading in three passes, the owner sees that Offer B costs less in total if held for the full term, but Offer A doesn’t involve property. Because the business expects a large payment from a festival client within six months, the owner asks whether Offer A’s early repayment fee can be removed. The answer shapes the final decision. Without the three passes, the owner might have chosen on the weekly figure alone.

Questions to ask before you sign

Keep this list handy:

1. What’s the total cost of finance, in dollars, over the full term?
2. How much will I actually receive after fees?
3. What security is being taken, and what’s registered?
4. Who is guaranteeing, and what does that mean for them?
5. Can I repay early, and what would it cost?
6. What happens if I miss a payment or my exit runs late?
7. What ongoing conditions apply?

Business.gov.au keeps a glossary of key financial terms that’s useful if a word in the contract isn’t clear. And if anything still doesn’t make sense, ask your accountant or lawyer before you sign. A good lender won’t mind.

Comparing a refinance offer

If you’re refinancing, add one more column to your comparison: the remaining cost of your current loans, plus any exit fees. Only then can you see whether the new offer is genuinely better. Our business loan refinance page walks through that calculation, and the merchant cash advance page explains how to convert an advance into a comparable total cost.

Want a second pair of eyes?

An offer you understand fully is an offer you can choose confidently. If you’d like help weighing up what’s in front of you, or finding an option that fits better, we’re happy to talk it through.

Our approach is simple. Your enquiry takes about a minute, and there’s no credit check involved. A real person reads what you send and gives you a call; we don’t parcel your details out to a crowd of lenders. Please describe your situation accurately on the form, including the amount, the purpose and any property, so the conversation can focus on what actually suits your business. Talk to a specialist.