How to compare business loans in Australia without being misled by the headline

Two lenders can quote you for the same $80k and give you numbers that look nothing alike. One talks in an annual rate, another in a monthly rate, a third gives you a factor rate and a weekly debit. None is lying. They’re just describing the price in different units, and the business lending market in Australia doesn’t force them to use the same one.

So comparing business loans properly means doing the translation yourself. It isn’t hard once you know which figures to ask for and which ones to ignore.

Why can’t you just compare rates?

Consumer loans in Australia come with a comparison rate, a standardised figure that folds most fees into one number. That requirement comes from the National Credit Code, and the Code generally doesn’t apply to credit used wholly or mainly for business. So a business lender can legally quote a rate that excludes a hefty establishment fee, or a monthly figure that looks small until you multiply it by twelve.

There are also three different pricing styles in common use:

• Annual interest rates on a reducing balance, typical of banks and secured non-bank lenders.
• Simple or flat pricing, where the cost is set upfront on the original amount and doesn’t fall as you repay.
• Factor rates, common with short-term online lenders and merchant cash advances, where you repay a fixed multiple of the amount borrowed. A factor of 1.2 on $50k means $60k back, whatever the term. Our factor rate calculator translates one into dollars per month.

Because these behave differently, especially if you repay early, the only fair common unit is dollars: what you receive, what you pay back, and when.

The six numbers to collect from every lender

Before comparing anything, ask each lender for the same set of figures on the same loan amount and term. If a lender won’t give them in writing, that tells you something.

Figure	What to ask	Why it matters
Amount received	How much lands in my account after any fees deducted at settlement?	A $100k loan with $4k taken out at the start is really a $96k loan
Total repayable	What’s the sum of every repayment over the full term?	The real price tag, before any optional extras
Upfront and ongoing fees	Every fee: establishment, valuation, legal, account, line, settlement	Fees can outweigh interest on short loans
Repayment frequency	Daily, weekly, fortnightly or monthly, and from which account?	Daily debits suit businesses with daily takings, not those paid monthly
Early payout cost	What would I owe if I paid it all off at month six?	Some products charge the full cost even if you repay early
Security and guarantees	What will you register, and who has to sign?	Two loans with the same price can carry very different personal risk

Then divide the total repayable by the amount received. That’s your cost per dollar actually put to work. It’s crude, but it’s very hard to disguise. The loan cost comparison calculator does this for two offers at once, and our breakdown of business loan costs and fees lists every charge you’re likely to meet.

Ask for the SMART Box by name

Here’s something many owners don’t know. In 2018 a group of online small business lenders signed a code of practice run through the Australian Finance Industry Association. One of the outcomes, introduced in early 2019, was a standard one-page pricing summary called the SMART Box (short for “Straightforward Metrics Around Rate and Total cost”).

It sets out, for a term loan, the total repayment, the total cost of credit, the average monthly repayment, an annualised rate and a cents-on-the-dollar figure, all in the same layout regardless of lender. If you’re comparing online term loans, ask each lender whether it provides one. When two lenders both hand you a SMART Box, you’re comparing apples with apples almost instantly.

It isn’t universal, and it doesn’t cover every product type, so you’ll still need the six-figure checklist above for banks, secured lenders and lines of credit. But it’s a free shortcut that most borrowers never use.

What matters besides price?

The cheapest loan is the right loan only if everything else about it works. Weigh these alongside the total cost.

Speed to funds

A bank may offer the lowest overall cost and take several weeks, especially if a valuation is involved. An online lender may fund in a day or two for more. If you’re settling a purchase, paying a tax bill before a deadline or securing stock at a discount, the slower option can cost more than the price difference. Our guide on how long a business loan takes gives realistic timeframes by loan type.

Security and personal exposure

Compare what each lender wants to hold. An unsecured loan with a director guarantee, a general security interest over business assets, a caveat over your home and a registered first mortgage are four very different levels of risk to you personally. Read secured vs unsecured business loans before deciding a lower price is worth putting the house up.

Flexibility

Can you redraw? Can you repay early and save the remaining interest? Is there a repayment holiday option if a big customer pays late? A line of credit priced a little higher can still be cheaper overall than a term loan if you only draw it for a few months of the year.

Repayment shape

Daily or weekly debits from the main trading account suit some businesses well and squeeze others badly. Match the frequency to when your money actually comes in.

Covenants and conditions

Larger and bank facilities can include financial covenants, reporting requirements and review dates. A cheap loan that the lender can review annually is a different product from a fixed-term loan that runs to maturity unless you default.

Want a second pair of eyes on two offers you’ve already got? Tell us about them here; no credit check happens when you enquire.

Where does the Banking Code fit?

If you’re borrowing from a bank that subscribes to the Banking Code of Practice, and your business counts as a small business under it, you get some useful protections. Under the current code, a small business is broadly one with turnover under $10m, fewer than 100 full-time equivalent staff and total business borrowing under $5m (including the loan you’re applying for).

Among other things, the code says standard small business loan contracts won’t include a default triggered by an unspecified “material adverse change”, and it gives guarantors specific rights to information and time before they sign. Those protections are part of the comparison too: a slightly dearer bank loan with them may sit more comfortably than a cheaper offer without.

Separately, the unfair contract terms rules were strengthened on 9 November 2023. Standard form contracts with small businesses (fewer than 100 staff or turnover under $10m) can no longer include unfair terms without risking significant penalties. That doesn’t make every contract fair, but it does give you a basis to question a term that looks one-sided.

A worked comparison: three offers for $120k

Here’s an illustrative example. A Perth landscaping company needs $120k for a skid steer and working capital. It receives three offers, all for two years.

	Bank (secured over equipment and director’s home)	Non-bank (secured over the equipment)	Online lender (unsecured, director guarantee)
Fees taken out at settlement	$1,500	$2,400	$3,600
Amount received	$118,500	$117,600	$116,400
Total repayable	$135,800	$144,900	$157,600
Cost per dollar received	about $1.15	about $1.23	about $1.35
Time to funds	about three weeks	about one week	two business days
Early payout	interest saved, small break fee	interest saved	most of the cost still payable

On price alone the bank wins clearly, by more than $20k against the online offer. If the owner can wait three weeks and is comfortable offering the home, that’s probably the answer, and it’s worth taking seriously.

But suppose the skid steer is an ex-hire unit at a discount that disappears on Friday. Then the real question becomes whether the speed is worth the extra cost, or whether the middle option, secured only over the machine itself, gives most of the saving without the home on the line. Laid out like this, the decision takes minutes.

The figures above are illustrative and won’t match any particular lender. The method is what transfers.

A quick checklist before you choose

1. Is every offer for the same amount and term?
2. Do you have the total repayable for each, in writing?
3. Have you worked out the amount received after deducted fees?
4. Do you know what early payout would cost on each?
5. Do you know exactly what security and which guarantees each lender wants?
6. Does the repayment frequency match when your cash arrives?
7. Will the money arrive before you actually need it?
8. If it’s a bank, does your business qualify as a small business under its code?

If the bank said no, that’s not the end of the comparison. Banks have tight boxes, and good businesses fall outside them every day. Our directory of Australian business lenders and the side-by-side guide to bank vs non-bank lenders show the next tier of options.

Comparing is easier with someone who sees the market every day

Getting three properly comparable quotes can take a week of phone calls. We can usually tell you where your business is likely to land a lot faster, because we see which lenders are approving which kinds of businesses right now.

Filling in our enquiry takes a minute or so and leaves your credit score untouched. We don’t sell your enquiry or pass it along a chain of brokers, so there’s no wave of unexpected calls. One of our team reads it, then calls you to work through the options in plain English. Give us your real turnover and what you actually need; honest inputs let us suggest a lender that fits straight away rather than after a false start.

Compare my options with a real person →