Quick answer
An application fee is a charge a lender makes for processing and assessing a loan application. Unlike an establishment fee, which is paid when a loan settles, an application fee may be payable whether or not the loan is approved, and it's often non-refundable. Many business lenders don't charge one separately, so compare total upfront costs across offers rather than any single fee.
Key points
- Pays for assessing the application, not for setting the loan up
- Can be non-refundable even if the loan is declined or withdrawn
- Some lenders fold it into the establishment fee; others charge nothing at all
- A demand for an upfront payment before any approval, to a personal account, is a scam warning sign
Of all the fees on a business loan, this is the one you may pay before you know the answer. An application fee is the lender’s charge for the work of assessing you: reading financials, running credit checks, reviewing security and making a decision. That timing is what sets it apart from the other upfront costs.
How it differs from other upfront fees
Business lenders name and bundle their fees differently, which makes side-by-side comparison harder than it should be. A rough guide:
| Fee | Pays for | When it’s charged | Refundable if declined? |
|---|---|---|---|
| Application fee | Assessing the application | On application or on approval | Often not |
| Establishment fee | Documents, security, settlement | At settlement | Usually not charged if the loan doesn’t proceed |
| Valuation fee | Independent property valuation | Before formal approval | Usually not, once the valuer has inspected |
| Legal or documentation fee | Lender’s solicitor | At settlement | Depends on the work done |
Some lenders don’t charge a separate application fee at all. They may recover the cost through a higher establishment fee instead. That’s why the number to compare is the total you pay to get the loan funded, not any one line.
When the fee matters most
The application fee has the most bite when there’s real doubt about approval. If your bank has already said no, or your file includes arrears, an ATO debt or patchy records, paying a non-refundable fee to a lender that’s unlikely to approve you is money lost. It’s worth asking for an indicative offer or a frank opinion on your chances first.
If you’re not sure which lenders would realistically say yes, ask us before paying anyone a fee.
Worked example: comparing two offers
A Toowoomba earthmoving contractor needs $150k for 24 months and gets two quotes:
| Lender A | Lender B | |
|---|---|---|
| Application fee | $0 | $990 (non-refundable) |
| Establishment fee | $3,500 | $1,800 |
| Total upfront fees | $3,500 | $2,790 |
On upfront fees alone, Lender B is $710 cheaper, if the loan goes ahead. If Lender B declines after assessment, the contractor is $990 out of pocket and starts again. Both quotes also need comparing on repayments and total cost over the 24 months, which our loan cost comparison calculator does in dollars.
Red flags around application fees
Genuine lenders tell you their fees in writing, invoice them from the business, and usually take them from the advance at settlement. Treat these as warning signs:
- a “guaranteed approval” offer that needs a fee before anything else happens
- payment requested to a personal bank account, gift cards or cryptocurrency
- a new fee appearing each time you’re told the money is about to be released
Our guide on how to spot a business loan scam covers these in more detail.
Related terms
- Exit fee: charged when you repay or leave a loan early.
- Line fee: an ongoing charge for having a facility available.
- Letter of offer: where every fee should be set out before you sign.
For a broader view, see business loan costs and fees.
Want to know where you stand before paying a cent?
Asking us costs nothing. There’s no fee to enquire and no credit check either. The form takes around a minute, one of our team reads it personally instead of broadcasting it to lender after lender, and they’ll call you with a straight view of what’s likely. Give us an honest picture of the business, including anything a bank didn’t like, so the option we raise first is one that can actually be approved.
Frequently asked questions
Is an application fee refundable if my loan is declined?
Often not. Because it covers the work of assessing the application, many lenders keep it whatever the outcome. Ask before you pay, and get the refund terms in writing.
What's the difference between an application fee and an establishment fee?
An application fee is charged for the assessment, sometimes before a decision. An establishment fee is charged when the loan settles, for documents, security registration and settlement. Some lenders use one fee for both, so read the fee schedule.
Is it normal to pay an application fee upfront?
For larger property-secured loans, some lenders ask for a fee or a valuation deposit before formal approval. It should be paid to the lender or its solicitor, with an invoice and a clear explanation. Being asked to pay a guarantee fee or an insurance fee upfront to an individual or an unrelated account, especially after an unsolicited offer, is a classic scam pattern.
Is an application fee tax deductible?
Generally it's treated as a borrowing expense when the loan is for business. The ATO spreads borrowing expenses over $100 across the shorter of the loan term and five years. Your accountant can confirm how it applies to you.
Can I negotiate an application fee?
Sometimes. A lender that wants your business may waive or reduce it, particularly on larger, well-secured loans, or offer to deduct it from the advance at settlement instead.