Quick answer
To compare business loans well, work in two stages. First compare loan types: define the purpose, amount, deadline, security and paperwork you have, and shortlist the two or three structures that fit. Then compare offers within that shortlist on total dollar cost, monthly equivalent repayment, early payout terms, security and conditions. Comparing lenders before you've chosen the right loan type is the most common mistake.
Key points
- Compare loan types first, then offers within the right type.
- Define purpose, amount, deadline, security and paperwork before you start.
- Put every offer into total dollars and a monthly equivalent.
- Read security, conditions and payout terms before choosing.
Most people compare business loans the way they’d compare phone plans: line up a few providers and pick the cheapest headline. It doesn’t work well for business finance, because the offers aren’t like for like. One is weekly over a year, another monthly over five; one wants your house, another wants nothing but a signature. This guide sets out a method that does work, in six steps.
Step 1: What exactly do you need?
Before looking at any lender, write down five things:
- Purpose. What will the money do? Be specific: “a second coffee machine and a counter refit”, not “growth”.
- Amount. The quoted cost, related costs and a modest buffer.
- Deadline. When must the money be available, and what happens if it’s late?
- Security. Is property available, and are you willing to use it?
- Paperwork. Are your BAS, tax returns and financials up to date?
These five answers narrow the field more than any rate comparison could.
Step 2: Which loan types fit those needs?
Different needs point to different structures:
| If your main need is… | Shortlist these first |
|---|---|
| A one-off cost with a quick payback | Unsecured loan, short term loan |
| Recurring or seasonal gaps | Line of credit |
| Customers paying slowly | Invoice finance |
| A vehicle or machine | Equipment finance |
| A large amount or long term | Secured business loan |
| Buying premises | Commercial property loan |
| Books behind | Low doc loan |
| Credit problems | Bad credit options |
| A tax bill | Tax debt loan or ATO payment plan |
Our business loan comparison tool ranks these for your answers.
Step 3: How do you get offers worth comparing?
Once you know the loan type, get two or three offers within it. Tips:
- Be accurate. Offers based on wrong information change later.
- Ask for the full terms in writing, including fees and payout examples.
- Avoid scattering formal applications. Each can add an enquiry to your credit file.
- Tell each lender your deadline.
Step 4: Put every offer in dollars
Convert each offer to the same footing:
| Measure | How |
|---|---|
| Total repaid | Repayments × number of payments + fees + any balloon |
| Money received | Loan amount minus deducted fees |
| Total cost | Total repaid minus money received |
| Monthly equivalent | Weekly × 52 ÷ 12, fortnightly × 26 ÷ 12 |
The loan offer comparer does these sums. Our total cost page has a worked example.
Step 5: Check what each offer asks of you
Cost isn’t everything. For each offer, list:
- Security: guarantees, general security agreements, property.
- Conditions: what must happen before settlement.
- Covenants: ongoing promises.
- Early payout: what you’d pay to finish early.
- Default: what triggers it and what follows.
Our page on guarantees and security explains what you’d be signing.
Step 6: Choose, then read the letter of offer
Rank by total cost, remove any whose monthly equivalent you can’t carry in a slow month, then weigh security and flexibility. Before accepting, read the letter of offer carefully and ask questions in writing.
A worked example from start to finish
Illustrative example. A Sydney physiotherapy practice wants $75,000 to fit out two new treatment rooms. Step 1: purpose clear, quotes in hand, needed in six weeks, the owners would rather not use their home, BAS current but last year’s return not yet lodged. Step 2: the shortlist is an unsecured term loan and a low doc loan, with equipment finance for the treatment tables. Step 3: they get three offers. Step 4: in dollars, Offer A is cheapest but has weekly repayments; Offer B costs a little more with monthly repayments; Offer C is dearest. Step 5: Offer A needs both directors’ guarantees and an all-assets GSA; Offer B needs one guarantee and no GSA. Step 6: they choose Offer B, because the monthly repayments match their monthly billing cycle and the lighter security keeps their next equipment purchase simple.
Common comparison mistakes
| Mistake | Better approach |
|---|---|
| Comparing lenders before loan types | Pick the structure first |
| Comparing weekly with monthly repayments | Convert to a monthly equivalent |
| Ignoring deducted fees | Use the money you actually receive |
| Assuming early repayment will save money | Ask for a payout example |
| Treating “unsecured” as risk-free | Read the guarantee and any GSA |
| Applying everywhere at once | Get a considered recommendation first |
How much time does a proper comparison take?
Less than most people expect. With documents ready, the needs exercise takes half an hour, getting offers takes a few days and the side-by-side comparison takes an evening. Against the cost of the wrong loan over several years, it’s time well spent.
When should you get help?
A broker or adviser can save time when the loan is large, when property or third-party guarantors are involved, when your credit file has issues, or when offers are hard to compare. Ask how they’re paid and whether they’ll show you more than one option.
How do you compare offers of different loan types?
Sometimes the shortlist includes two different structures, such as an unsecured term loan and a line of credit, or equipment finance and a property-backed loan. You can still compare them, but you need to model how you’ll actually use each:
- For a line of credit, estimate how much you’ll draw, for how long, and add the line fee for the full year.
- For equipment finance with a balloon, include the balloon and the asset’s likely value at the end.
- For a property-backed loan, include valuation, legal and discharge fees.
- For invoice finance, estimate a typical month’s fees on your usual invoice volume.
| Comparing | Model it as |
|---|---|
| Term loan vs line of credit | Total cost of each under your realistic drawing pattern |
| Equipment finance vs unsecured loan | Total cost including balloon; what each can fund |
| Secured vs unsecured | Total cost including security fees; what’s at risk |
The structure that wins on paper isn’t always the one that fits how your business works, so weigh the dollar result against flexibility and risk.
How do you keep the comparison honest?
It’s easy to talk yourself into the offer you like best. A few habits keep the comparison fair:
- Use the same assumptions for every offer: the same amount, the same expected payout date.
- Write the numbers down rather than holding them in your head.
- Score security and flexibility explicitly, not as an afterthought.
- Sleep on it if the decision is close and the deadline allows.
A comparison written on one page, with every offer in the same columns, almost always makes the right choice obvious.
Let us do the comparing
If you’d rather someone else lined the options up, that’s what we do. Asking doesn’t touch your credit file; a check comes up only if you decide to proceed. We don’t spray your details at a pile of lenders. A real person works through these six steps with you and shows you the options in plain dollars.
Please be accurate on the form so the comparison starts from solid ground. Start your enquiry, or work through the first two steps in the comparison tool and then send it to us.
Frequently asked questions
What's the best way to compare business loans?
Start with your needs, shortlist the loan types that fit them, then compare offers within those types on total cost in dollars, the monthly equivalent repayment, early payout terms, security and conditions.
Should I compare interest rates?
Rates alone are misleading for business loans because pricing methods, fees and terms vary. Total cost in dollars over the expected life of the loan is a fairer measure.
How many offers should I compare?
Two or three well-matched offers is usually enough. Applying formally to many lenders can add enquiries to your credit file.
Does comparing loans affect my credit score?
Reading and comparing information doesn't. Formal applications can add enquiries. Ask whether an enquiry involves a credit check before you proceed.
What if the cheapest offer has stricter terms?
Weigh the dollar saving against the extra risk or inflexibility. A slightly dearer loan with lighter security or fairer payout terms can be the better choice.