Quick answer
To compare two business loan offers, put both on the same page and measure net cash received, total cost in dollars, cost per year of use, security required, repayment frequency, and what it costs to leave early. Then weigh the non-price terms, because the cheaper loan on paper is not always the better fit for your cash flow or timing.
Key points
- Compare on the same footing: same net cash, same term or the same cost per year of use
- The lower total is often just the shorter loan, so divide by years before you decide
- Price the security: a cheaper offer that needs your home or a general security agreement has a hidden cost
- Put a dollar value on time if one offer settles weeks later than the other
- Ask both lenders the same written questions so their answers can be lined up
A bank has come back with a yes. An online lender has come back with a different yes. One is cheaper on the front page, the other is quicker, and neither is wrong. You are now doing something nobody trained you for: comparing two documents that were written to be read separately.
Most mistakes at this stage are not about maths. They come from comparing things that look alike and aren’t. A 24-month loan against a 60-month loan, a secured offer against an unsecured one, a monthly debit against a weekly one. The method below makes the offers comparable first, and only then asks which is better.
Step one: make the two offers comparable
Before you judge them, put both on a single page with the same lines. Use our true cost guide to fill in the numbers:
| Line | Offer A | Offer B |
|---|---|---|
| Amount on the contract | ||
| Net cash that reaches your account | ||
| Term | ||
| Repayment and how often | ||
| Total repayments plus all fees | ||
| True cost (total minus net cash) | ||
| True cost divided by years of use | ||
| Security and guarantees required | ||
| Cost to repay early | ||
| Days from yes to money |
If you can’t fill in a line, that is itself information. Ask the lender for it in writing, using the questions in our guide on what to ask a lender before you sign.
A worked example: the cheaper loan that is not cheaper
Here is an illustrative case. A removalist firm needs $150k to fit out two trucks and pay a depot lease bond. The figures are examples only.
| Offer A: bank term loan | Offer B: online lender | |
|---|---|---|
| Amount | $150,000 | $150,000 |
| Fees deducted at settlement | $3,000 | $1,500 |
| Net cash | $147,000 | $148,500 |
| Term | 60 months | 24 months |
| Monthly repayment | $3,150 | $7,150 |
| Total repayments | $189,000 | $171,600 |
| True cost | $42,000 | $23,100 |
| True cost per year of use | $8,400 | $11,550 |
| Security | Property mortgage | Unsecured, director guarantee |
| Time to funds | About 4 weeks | About 3 days |
On the total, B looks like the winner at $23,100 against $42,000. But B is a 24-month loan and A is a 60-month one. Per year of use, A costs $8,400 and B costs $11,550, so A is the cheaper money by $3,150 a year. B’s low total is mostly the effect of paying it back faster.
That is a good reason to take the bank offer seriously. Banks are often the cheapest source of funds, and when a business fits their criteria and can wait, the numbers frequently look like this.
Now flip it. Suppose the trucks are needed in a week to start a contract worth $12,000 a month. Waiting four weeks costs roughly $9,000 of delayed revenue. That is a real number, and it changes the comparison. Time is a cost, and the example shows why you should write it down rather than carry it in your head.
The averages here are rough, because the balance falls as you repay. Run both offers through the loan cost comparison calculator to see the shape more precisely.
Short on one of the two offers? You can start an enquiry here and we will look at what else fits.
Step two: price what the headline does not show
Several things never appear on the cost line but still change which offer is better.
Security. A loan secured by property usually costs less than an unsecured one because the lender takes less risk. But the security isn’t free to you. It is an asset you can’t easily offer elsewhere, it may need a valuation and legal work, and a general security agreement over the whole business can limit future borrowing. Our guide to security and guarantees shows what each type commits you to.
Personal guarantees. If one offer needs a director guarantee and the other doesn’t, the personal exposure is a cost even though it is never invoiced. Read personal guarantees explained before treating them as paperwork.
Covenants and conditions. Some offers require you to keep certain ratios, bank with the lender, or get consent before borrowing elsewhere. Breaching a covenant can give the lender rights you didn’t expect.
Repayment frequency. Weekly or daily debits are lighter each time but pull cash faster. If your income arrives monthly, that mismatch can create the very pinch the loan was meant to fix.
Early repayment. If you expect a big invoice or a property sale to clear the debt early, the payout terms might matter more than the interest. See early repayment savings and penalties.
Flexibility. Can you redraw, top up, or pause repayments? A facility you can use again can be worth more than a lump sum that disappears.
Step three: score the non-price terms
Not everything fits a dollar figure. A simple scoring grid keeps the decision honest. For each offer, rate these from one to five for your business, then look at the pattern rather than the total:
- How well the repayment pattern matches when your money arrives
- How comfortable you are with the security and guarantees
- How reliable the lender seems on settlement dates
- How easily you could refinance or exit
- How well the loan size matches what you actually need
If one offer wins on price and loses badly on two or more of these, treat that as a warning, not a tie-break.
Which offer wins in which situation?
There is no universal answer, but the usual patterns are these.
- The bank offer wins when you can wait for the assessment, you are happy with the security, your documents are in order, and the aim is lower total cost over a longer period.
- A non-bank offer wins when timing is tight, you need less paperwork, the bank asked for something you can’t provide, or you want a shorter commitment with a clear end date.
- Neither wins when the loan solves the wrong problem. If the real issue is a recurring cash flow gap, a larger loan can mask it rather than fix it. Our guide on choosing finance for your business purpose is a good check.
If your bank said no, that doesn’t mean you are out of options. It means the next step is looking at lenders whose criteria suit your trading history or security, and then using this same page to compare them. The guide on banks versus non-bank lenders explains how the two differ.
Can you negotiate once you have two offers?
Often yes, on specific items rather than the overall price. The most movable are:
- The establishment fee, especially on larger amounts
- Exit or early repayment charges
- Valuation choice, where a cheaper method may do
- Account or line fees
- Which assets sit under the security
Be factual and polite: “Another lender has offered a lower establishment fee. Is there any room on yours?” Don’t exaggerate. If you want to go further, our list of terms you should negotiate goes line by line.
A decision checklist
Before you accept either offer, confirm each of these:
- I know the net cash I will receive, in dollars
- I have compared true cost per year of use, not just the total
- I know exactly what I am putting up as security and guarantee
- I know what repaying early would cost
- I have read the letter of offer right through, including the conditions precedent
- My accountant has seen the figures
- The offer has not expired
If you tick the lot and still can’t separate the two, ask which one you would rather explain to your accountant in twelve months. That tends to settle it.
Only have one offer, or none?
Maybe you’re holding a single offer and wondering whether it is the best on the market. Maybe a bank declined you and there’s nothing to compare yet. Either way, a short enquiry with us is an easy way to see what else could work. It runs to about a minute of typing, and a credit check doesn’t happen just because you asked. Your details stay with us rather than going out to a string of lenders. A real person reads your situation and calls you. Get the amount, purpose and timeframe right on the form and the first suggestion should be a sensible one.
Frequently asked questions
What should I compare when I have two business loan offers?
Compare the net cash you will receive, total repayments and fees, the term, the repayment frequency, the security and guarantees required, early repayment terms, and how long each takes to fund. Price matters, but so do conditions that restrict what you can do while the loan runs.
Is the offer with the lower repayment the cheaper one?
Not necessarily. A lower repayment often comes from a longer term, which usually means more interest in total. Check the total repayments and the cost per year of use, not just the instalment, before you decide.
How do I compare a bank offer with a non-bank lender offer?
Use the same cost sheet for both. Banks are frequently the cheapest money when you fit their criteria and can wait for the assessment, so take that offer seriously. A non-bank may win on speed, flexibility or on how it treats your security, and you can put a dollar value on each.
Should I ask lenders to match each other?
It is reasonable to ask whether a lender can improve a fee or a condition, particularly an establishment fee or exit fee, and many do. Be honest about the alternative on the table. Do not invent offers, because lenders can usually tell.
Does comparing offers hurt my credit file?
Looking at offers and asking for written terms does not touch your credit file. Formal applications can leave an enquiry on it, so ask whether a lender will give indicative terms before it runs a full credit check.
How long should I take to decide?
Letters of offer usually carry an acceptance date, often a week or two. Use the time to ask questions in writing and have your accountant review the figures, but check the expiry so the better offer does not lapse while you wait.