Quick answer
To choose between online business lenders, ignore the headline and compare each offer in dollars: the total you will repay, how often you repay, what security or guarantees you give, what happens if you repay early, and how the lender treats you when something goes wrong. Two offers for the same amount can differ by thousands once fees and timing are counted.
Key points
- Turn every offer into total dollars repaid and dollars per month of borrowing before comparing
- Repayment frequency matters as much as price when your income arrives monthly
- Look for security wording: general security agreements, PPSR registrations and director guarantees
- Check for early-repayment rebates, default fees and the right to change terms without notice
- An offer that is easy to accept is not always easy to exit, so read the exit terms first
Online business lenders look alike. The websites share a calm blue palette, a slider for the amount, and a promise of an answer in minutes. Underneath, the contracts can be very different, and the differences are rarely on the front page.
This guide gives you a way to put two or three online offers side by side so the real differences show up before you sign. If you want a wider view of the lender types first, our guide on how to choose a business lender covers the market as a whole. Here we stay with the online end, where Prospa, Moula, BizCap and OnDeck Australia are among the names you will meet in our directory.
What do online lenders actually look at?
Most online lenders decide largely from your business bank transactions, often through a read-only data connection, plus time in business and turnover. The RBA notes that unsecured credit has stayed below 5 per cent of SME credit, which tells you something useful: online unsecured lending is a small part of the market and the lenders compete hard in it. Competition is good for you, as long as you compare properly.
Before you apply anywhere, check three things yourself:
- Your deposits. Steady, regular deposits matter more than a single large month.
- Your conduct. Dishonours, overdrawn days and unpaid ATO items show up in the same statements.
- Your existing debts. Other online loans with daily debits reduce what a new lender will offer.
How do I compare offers in dollars?
Ignore the monthly-rate language and build a small table for each offer. Here is an illustration, invented for this guide.
A landscaping business wants $50k for new mowers and a trailer. It has two online offers.
| Offer A | Offer B | |
|---|---|---|
| Amount received in your account | $50,000 | $48,500 |
| Establishment fee | None | $1,500, deducted from the $50,000 |
| Total repaid | $58,000 | $60,000 |
| Term | 6 months | 12 months |
| Repayment rhythm | Weekly | Weekly |
| Cost in dollars (total repaid minus amount received) | $8,000 | $11,500 |
| Cost per month of borrowing (roughly) | $1,333 | $958 |
| Weekly repayment (roughly) | $2,231 | $1,154 |
Offer A costs less overall, so it looks better. But the weekly repayment is nearly double. If the business earns most of its profit in the spring, six months of heavy weekly debits could be hard to carry. Offer B costs more in total, yet the cash flow is gentler and the cost per month is lower.
Neither is “right”. The point is that the dollars, the timing and the cash flow need to be compared together. The loan cost comparison calculator does the arithmetic, and our guide on how to compare two loan offers has the longer method.
Notice what Offer B did to the headline: the $1,500 fee came out of the advance, so only $48,500 landed in the account. Always ask whether fees are added to the balance or deducted from the funds, because the equipment still costs $50k.
Does the repayment rhythm suit how my money arrives?
Daily and weekly repayments are common in online lending because they let lenders see the repayments arrive and limit their exposure. They suit businesses with daily takings, such as cafés and retail. They can strain a business that invoices on 30-day terms, because repayments leave before invoices are paid.
Ask for the repayment calendar for your first three months and compare it to your own cash flow forecast. If a week with five debits coincides with payroll and a BAS, you want to know now. Our guide on daily vs weekly vs monthly repayments goes deeper.
Spotted a mismatch and unsure what would fit better? Send us the numbers and a person will look at what repayment shape suits your trading pattern. Enquiring does not involve a credit check.
What security and guarantees do they ask for?
“Unsecured” on the website does not always mean nothing is at risk. Look in the contract for:
- A general security agreement over the business’s assets, registered on the PPSR. Our glossary entry on the general security agreement explains what this gives the lender.
- A director guarantee, which makes you personally liable if the company cannot pay. See business loans and personal guarantees.
- Caveat or mortgage rights over property, which sometimes appear in larger online facilities.
Two offers for the same amount can put very different things at stake. Compare what you could lose, not just what you will pay.
What happens if I repay early, or fall behind?
ASIC’s guidance on unfair contract terms gives examples that are directly relevant to small business loans. It describes a lender that could change any term on five days’ notice, including raising fees, and a $5,000 default fee charged on a missed $20,000 repayment from a business with a strong payment history. In both cases ASIC says such terms may be unfair.
You do not need to litigate to use that as a checklist. Read the contract for:
- Early-repayment rules. Is there a rebate, a minimum payback or nothing at all? With a fixed-multiplier price, early repayment may save little.
- Default fees and default interest. Are they proportionate to the lender’s loss?
- Unilateral changes. Can the lender change fees or terms without agreement?
- Cross-default clauses. Does missing a payment elsewhere trigger a default here?
- Restrictions on further borrowing. Can you take an equipment loan without breaching this one?
The same ASIC page notes that unfair terms in standard form small business contracts can be declared void and that providers can be fined. That protection applies where the business has fewer than 100 employees or turnover under $10m and the upfront price does not exceed $5m, which covers most online loans.
How do I check who I am dealing with?
Spend ten minutes before sharing a bank login:
- Look up the company and ABN on ASIC’s registers and ABN Lookup.
- Ask whether the lender belongs to AFCA. Lenders that only provide business credit are not legally required to join, so ask rather than assume. See how to complain about a lender.
- Search for the contract’s governing terms on the website, not only the marketing pages.
- Treat any lender that contacts you unprompted, or asks for a fee before funds arrive, as a red flag. Our page on business loan red flags lists more.
A short decision checklist
Before you accept any offer, you should be able to answer yes to each of these:
- I know the total I will repay in dollars and the amount I will actually receive.
- The repayment calendar fits my cash flow for the next three months.
- I know what security or guarantee I am giving.
- I understand the cost of repaying early or late.
- I have checked the lender on ASIC’s registers and know its complaints route.
- If I could pay for the same money from a bank, I have at least asked.
On that last point: a bank is often the cheapest source, and a bank offer you qualify for is worth taking seriously. Online lenders earn their place when speed, a short trading history or a past decline rules the bank out.
Want a second pair of eyes on your options?
If you have offers already, or you are weighing whether to apply online at all, we can help you read them against your actual situation. The enquiry form takes about a minute, and nothing is checked on your credit file when you send it. We do not hand your information to a stack of lenders, so your phone will not start ringing. One of our team reads your answers and calls you. Describe the purpose and the timing honestly, including any past declines, so the option we raise first is one that can actually work.
Frequently asked questions
What is the quickest way to compare two online business loan offers?
Write down for each: the amount you receive in your account, the total you repay, the number of repayments and their frequency, and every fee. Subtract the amount received from the total repaid to get the cost in dollars, then divide by the months you will actually have the money.
Do online lenders do a credit check?
Many do, and some ask for read-only access to your business bank feed, which is a separate step. Ask before you proceed whether a formal credit enquiry will be lodged, because a hard enquiry stays on your file.
Is a factor rate cheaper than interest?
Neither is automatically cheaper. A factor rate is a fixed multiplier on the amount advanced, so paying early often saves nothing unless the contract gives a rebate. Compare the dollars, not the label. Our factor rate calculator helps.
What is a general security agreement and should I worry about it?
A GSA gives the lender security over the business's present and future assets and is usually registered on the PPSR. It is common for larger online loans. It is worth understanding because it can affect your ability to borrow elsewhere until the loan is repaid and the registration is removed.
Should I stack loans from several online lenders?
It is rarely a good idea. Overlapping daily or weekly repayments can squeeze cash flow quickly, and many contracts restrict further borrowing. If you need more than one lender can provide, speak to someone about restructuring first.