Comparison rates and business loans: why the number you're used to seeing usually isn't there

If you’ve ever shopped for a home loan or a car loan, you’ve met the comparison rate: a small asterisked figure sitting next to the headline number. Then you start looking at business loans and it’s gone. No asterisk, no second figure, sometimes no rate at all until a human calls you back.

That absence is not a trick, and it isn’t a sign you’ve landed with a dodgy lender. It’s a quirk of how Australian credit law is divided. This guide explains where comparison rates come from, why they stop at the edge of consumer lending, and what to use in their place so you can still put two business offers side by side and know which is cheaper.

Where does the comparison rate come from?

The comparison rate is a creature of the National Credit Code. As ASIC describes it, the Code’s advertising rules require a comparison rate when a lender advertises fixed-term credit for personal, domestic or household purposes. The idea is sound: a lender can make a headline figure look attractive by loading costs into fees, so the law forces one blended number that includes the interest and most of the fees.

Two things follow. First, the rule is about purpose. The Code applies to credit provided wholly or predominantly for personal, domestic or household use (and to certain residential investment property). A loan for business purposes is outside it. Second, the blended number is calculated on a standard reference loan so that every lender uses the same yardstick. That is why a comparison rate on a personal loan can be read against another lender’s without anyone sharing their working.

Business lenders aren’t required to follow that rule, so most don’t. Some banks show indicative figures on particular products, but there’s no common reference loan behind them, which makes them hard to compare across lenders.

What is a comparison rate missing, even where it applies?

It helps to understand the limits, because the same limits apply to any single-number shortcut you might meet in business lending.

• It assumes a reference loan. The calculation rests on a fixed loan size and term. If your loan is a different size or length, the blended figure can move, because a fixed fee is a bigger share of a small or short loan.
• It leaves some costs out. Government fees and charges that apply only in certain circumstances are excluded, as are fees that only trigger if something happens, such as a late payment or early payout.
• It tells you nothing about cash received. If fees are taken from the advance, you receive less than the headline amount, and you might need to borrow more to end up with the same working capital.
• It’s still a rate. A rate doesn’t tell you how many dollars leave your account, and dollars are what you budget with.

None of that makes a comparison rate useless for what it was designed for. It just means that, for a business decision, a rate of any kind is the wrong unit.

What should you compare instead?

Cost in dollars. For every offer, work out two figures:

1. Total you will pay. Every scheduled repayment added together, plus every fee you pay separately (account-keeping fees, line fees, security registration, legal costs you are asked to cover).
2. Cash you will receive. The loan amount, less anything deducted at settlement.

Subtract the second from the first. That’s the cost of borrowing, in dollars, and it can be compared across a bank term loan, a non-bank loan and a short-term product without any shared methodology. Our true cost walkthrough shows the same method with more offers, and the loan cost comparison calculator does the arithmetic if you’d rather not.

The comparison only works when the offers are like for like. Ask each lender to quote the same amount, the same term and the same repayment frequency. If one lender quotes weekly repayments and another monthly, the totals can differ for reasons that have nothing to do with price. Our guide to daily, weekly and monthly repayments explains why.

A worked example: when the cheaper repayment isn’t cheaper

Say you need $80k over 36 months. Two lenders send written quotes. The figures below are illustrative.

	Lender A	Lender B
Monthly repayment	$2,650	$2,580
Total of 36 repayments	$95,400	$92,880
Establishment fee (deducted at settlement)	$400	$1,800
Account fee, $30 a month	none	$1,080 over 36 months
Cash you receive	$79,600	$78,200
Total paid, all-in	$95,400	$93,960
Cost of the loan (total paid minus cash received)	$15,800	$15,760

Lender B’s monthly repayment looks $70 lighter, which adds up to $2,520 across the term. Once its fees are counted, though, the gap shrinks to $40. And Lender B puts $1,400 less cash in your account. If your plan needs the full $80k of working capital, you’d have to borrow more from Lender B to make up the shortfall, and the cost rises with it.

No rate, headline or blended, would have shown you that. It took two columns of dollars.

What do banks do differently?

Banks are often the cheapest money in the market, and a bank offer that fits you deserves proper attention. Many bank term loans for businesses are priced on a rate that’s confirmed in the letter of offer rather than advertised, so the discipline is the same: ask for the letter of offer, the fee schedule and the total repayable, and run the dollar comparison above. If a bank has already said no, that doesn’t end your options; our guide to what to do after a business loan is declined covers the next step, and the comparison method works just as well on non-bank offers.

Which protections do small businesses actually have?

A missing comparison rate doesn’t leave you without protection. Since 2016, standard form contracts for financial products with small businesses have been covered by the unfair contract terms law, and the regime was strengthened in November 2023. In ASIC’s words the law applies to small business contracts where the upfront price doesn’t exceed $5m. A court can declare an unfair term void. This deals with terms that are one-sided and not reasonably necessary to protect the lender, such as unilateral variation rights, not with price disclosure. The practical takeaway is that your protection comes from contract fairness and your own diligence on the numbers, not from a standard disclosure figure.

If a dispute arises with a lender that is an AFCA member, the Australian Financial Complaints Authority can look at small business complaints too. Our guide on AFCA and small business disputes explains how.

How do you get comparable quotes?

Treat it as a short checklist:

• Ask for the same amount, term and repayment frequency from every lender.
• Ask for the fee schedule in writing, including account, line, late, dishonour and early payout fees.
• Ask what is deducted at settlement so you know the cash you will receive.
• Ask for the early payout figure at month 12 as well as at the end, since exit terms differ widely. See early repayment savings and penalties.
• Put it in a table and subtract. The smaller cost wins, unless security, speed or flexibility matters more to you.

Our broader guide to comparing business loans covers the non-price factors.

Not sure which offers are realistic for your business in the first place? You can see what’s available to you before you start collecting quotes; it takes about a minute.

Ready to put real numbers on it?

Comparing is far easier when you know which lenders would actually look at your situation. Our enquiry form takes about a minute, and nothing about it touches your credit file: there’s no credit check when you enquire, so you can ask without a mark on your record.

We don’t pass your details around to a crowd of lenders, so your phone won’t start ringing from strangers. A real person reads your enquiry, thinks about what suits your business and calls you to talk it through. If you fill the form in accurately, with the amount you need, what it’s for and how long you have been trading, the first option we raise is much more likely to fit.

Ask for options that fit →