The business loan rate advertised on a lender’s website is rarely the number you actually end up paying, once fees, term, and structure are factored in. Two loans with the same headline rate can cost meaningfully different amounts over their life, and two loans with different headline rates can end up costing about the same. Comparing properly means looking past the number lenders lead with.
This guide covers what to actually compare when shopping for a business loan rate, and how to avoid the comparison mistakes that cost businesses money.
A business loan rate is one input into what you actually pay, alongside the loan term, any fees charged, and whether the rate is fixed or variable. Our Business Loan Interest Rates guide covers what drives pricing in the current market in more detail, including how secured and unsecured lending compare and what the Reserve Bank of Australia’s own data shows about typical business borrowing costs.
For the purposes of comparing offers, the practical point is this: never rank two loans purely by the advertised rate. Always work out the total cost first.
The rate itself, and whether it’s fixed or variable. A fixed rate gives repayment certainty for the fixed period. A variable rate moves with the market, which can work for or against you depending on where rates head next.
Establishment and application fees. Often charged as a flat fee or a percentage of the loan amount, these add to the real cost of the loan from day one and should be added into any comparison, not treated as a separate line item you’ll deal with later.
Ongoing fees. Monthly or annual account keeping fees compound over the life of the loan and can meaningfully change which offer is actually cheaper over a multi-year term.
Early repayment or break costs. If there is a reasonable chance you will repay the loan early, whether through refinancing, a cash injection, or selling the business, check what it costs to exit before you sign, not after you decide to leave.
The loan term. A longer term lowers the monthly repayment but increases total interest paid. Comparing two offers with different terms purely on monthly repayment size will always favour the longer one, even when it is the more expensive option overall.
Security requirements. A lower rate secured against property is not directly comparable to a higher rate unsecured offer, they are different risk propositions, not just different prices. Compare like structures where possible, and treat the rate difference as the price of putting an asset on the line if you are weighing one against the other.
Some lenders publish a comparison rate alongside the headline rate, intended to fold fees into a single, more comparable figure. This can be a useful shortcut, but comparison rates are calculated against a standard loan amount and term that may not match your actual situation, so they are a starting point for comparison rather than a substitute for running your own numbers on your specific loan amount and term. ASIC’s Moneysmart has independent guidance on reading comparison rates and understanding what they do and don’t capture.
Take two offers for a $100,000 business loan over 5 years.
Offer A: 8.5% p.a., $500 establishment fee, no ongoing fees, no exit fee. Offer B: 7.9% p.a., $1,200 establishment fee, $15 monthly account fee, 1% exit fee if repaid before year 3.
On the headline rate alone, Offer B looks better. Run both through the Business Loan Repayments calculator and add the fees back in, and the picture flips. Offer A’s higher rate costs roughly $1,730 more in interest over the 5 years, but Offer B’s establishment fee plus $900 in ongoing account fees over the term add up to around $2,100, before even factoring in the exit fee if it’s repaid early. Offer B, the “cheaper” loan on paper, ends up costing more overall. Neither offer is objectively wrong, but the decision changes entirely once the full picture is on the table instead of just the two headline percentages.
It is common for the same business to receive noticeably different rate offers across lenders, for reasons including:
This spread is exactly why comparing across multiple lenders matters more in business lending than it might for a more standardised product. Applying to each one individually, however, generates a separate credit enquiry per application, which is where working with a broker changes the process rather than just the outcome.
Because formally applying to a lender typically generates a credit enquiry, comparing rates properly across a real spread of lenders is difficult to do entirely on your own without a cost. Lodestar Finance compares indicative offers across a panel of banks and non bank lenders, working out the genuine total cost comparison, fees and all, before anything is formally submitted. Whether you’re looking at a secured or unsecured structure, the same comparison discipline applies.
FAQs
It depends heavily on whether the loan is secured or unsecured, and on your business's own risk profile. Our Business Loan Interest Rates guide covers current benchmark figures in more detail.
It's more complete in that it folds in standard fees, but it's calculated against a standard loan amount and term that may not match yours, so it's a useful starting point rather than a precise figure for your specific loan.
The lowest total cost, calculated over your actual loan amount and term, is the number that matters. The lowest headline rate does not always produce the lowest total cost once fees and terms are factored in.
Getting indicative quotes generally does not, but formally applying to multiple lenders individually does generate separate credit enquiries. Comparing through a broker before formally applying limits this.
Sometimes a higher rate reflects genuine advantages, faster settlement, no security required, more flexible terms, or a shorter commitment period, that matter more to your situation than the rate difference alone.
A fast business loan can genuinely settle within 24 to 48 hours in the right circumstances, but “instant approval” in the literal sense doesn’t exist
Getting a start up business loan is harder than financing an established business, because the thing most lenders rely on most, trading history, doesn’t exist
Having bad credit makes getting a business loan harder, not impossible. Mainstream lenders rely heavily on your credit file, but it isn’t the only thing
