Business loan fees, and how to compare them

Fees are where many business loans hide a large part of their cost. A loan with modest repayments can still be expensive once establishment, account, line and exit fees are added. This page lists the common charges, groups them so they’re easier to compare, and shows which ones deserve the most attention.

What fees might a business loan carry?

Group	Fee	What it is	Watch for
Upfront	Establishment fee	Cost of setting up the loan	Deducted from payout
Upfront	Documentation fee	Preparing loan documents	Charged on top of establishment
Upfront	Valuation fee	Valuing property security	One per property
Upfront	Legal fees	Lender’s and sometimes your own	Both sides can add up
Upfront	Title search and registration	Searching and registering security	Government charges passed on
Ongoing	Account-keeping fee	Monthly or annual admin charge	Adds up on long terms
Ongoing	Line or limit fee	On credit lines and overdrafts	Charged on the full limit
Change	Early payout or break fee	Repaying before the end	Can remove the saving
Change	Variation fee	Changing the loan terms	Charged for restructures
Change	Discharge fee	Releasing security at the end	Property-backed loans
Problems	Late payment fee	Missed due date	Per occurrence
Problems	Dishonour fee	Failed direct debit	Can stack quickly
Problems	Default fees and costs	Breach of the loan	Enforcement costs
Other	Broker fee	Paid to a broker, if charged	Must be disclosed

Which fees matter most when comparing?

1. Fees deducted from the payout. They reduce what you receive for the same repayments.
2. Ongoing fees on long terms. A small monthly fee over five years is a sizeable sum.
3. Line fees on unused limits. You pay for availability, not just use.
4. Early payout fees if there’s a chance you’ll repay early. See early payout.
5. Security-related fees on property-backed loans.

How do fees differ between loan types?

Loan type	Fees usually most significant
Unsecured loan	Establishment, early payout
Line of credit	Line or limit fee, account fees
Invoice finance	Service, discount and minimum monthly fees
Equipment finance	Establishment, PPSR registration, early payout
Secured loan	Valuation, legal, registration, discharge

How do you put fees into the comparison?

Add every fee to the repayments over the term and any balloon, then subtract the money you actually receive. That’s the total cost. Our total cost page shows a worked example, and the loan offer comparer adds fees in for you.

Illustrative example. A Mackay mechanic compares two $40,000 offers with almost identical weekly repayments over 18 months. Offer A has a $2,400 establishment fee deducted from the payout. Offer B has a $600 establishment fee and a $25 monthly account fee. Over 18 months Offer B’s fees total $1,050, and he receives the full $40,000. Offer B is clearly cheaper, even though the repayments looked the same.

Questions to ask about fees

• Can I have a full list of every fee, in writing?
• Which fees are deducted from the payout?
• What do I pay if I repay early, and does it reduce over time?
• What fees apply if a payment is late or dishonoured?
• Are there fees to change or extend the loan?
• Are there any fees I pay before approval? (Be cautious if so.)

Small business contracts with unfair terms may be challenged under the law ASIC administers. That’s no substitute for reading the letter of offer carefully before you sign.

How do fees change the cost on small and large loans?

Fixed fees weigh much more heavily on small loans than on large ones. A $1,000 establishment fee is a big share of the cost of a $10,000 loan and a minor part of a $500,000 loan.

Loan size	Effect of fixed fees
Under $25k	Fees can be a large share of the total cost
$25k to $250k	Fees matter, alongside pricing and term
Over $250k	Pricing and term usually matter more, but security fees add up

That’s why a property-backed loan can be poor value for a small, short need: valuation, legal and discharge fees can outweigh any saving on pricing. And it’s why, on larger loans, a small difference in pricing can matter more than a difference in fees.

Are any fees tax deductible?

Many costs of borrowing for business purposes can be deductible, and some borrowing expenses are spread over several years rather than claimed at once. The rules depend on the type of fee and the loan, so ask your accountant how the fees on your loan will be treated before comparing after-tax costs.

Get offers with every fee spelled out

When we bring you options, the fees are part of the picture from the start. Enquiring won’t touch your credit file; a check only comes up once you decide to go ahead. Your details aren’t fired off to a long list of lenders. A real person lays out each option’s repayments and fees side by side, so you can see the full cost before you commit.

Please be accurate on the form so the offers we compare are realistic. Start your enquiry, or add up an offer’s fees with the loan offer comparer and then check your options.