Quick answer
To compare business finance options, check each one against the same list: does it fit the purpose and timeframe, how much cash will you receive, what is the total cost and cost per month, how big and how frequent are repayments, what security and guarantees are needed, how flexible is it, and what does it cost to leave early. Score each option and weigh price against risk.
Key points
- Use the same checklist for every option.
- Fit to purpose comes before price.
- Compare cost in dollars, not headline rates.
- Security, flexibility and exit terms can decide a close call.
Checklist
- Fits purpose and timeframe
- Cash received after fees
- Total cost and cost per month
- Repayment size and frequency
- Security required
- Guarantees required
- Flexibility (redraw, extra repayments, variations)
- Early exit cost
- Speed and certainty of funding
- Conditions before funding
When options pile up, comparisons get messy. A term loan, a line of credit, an equipment lease and a cash advance all describe themselves differently, and each lender highlights the feature that makes it look best. A single checklist applied to every option cuts through that. This guide gives you the checklist and explains how to use it.
Part 1: Fit
Before price, ask whether each option suits what you are trying to do.
- Purpose. Is this type of finance designed for your need? Equipment finance for equipment, revolving facilities for recurring gaps, term loans for one-off projects, invoice finance for slow-paying customers. Our loan type reviews set out what each is for.
- Timeframe. Does the term match how long the money takes to come back?
- Amount. Does it provide what you need, without forcing you to borrow much more than you need?
An option that fails on fit should usually be set aside, however cheap it looks.
Part 2: Cost
For each option that fits, calculate:
| Measure | How |
|---|---|
| Cash received | Amount less fees deducted |
| Total cost | Total repayments plus all fees less amount borrowed |
| Cost per dollar received | Total cost divided by cash received |
| Cost per month | Total cost divided by term |
For revolving facilities, estimate realistic usage. For invoice finance, estimate how quickly customers pay. The offer comparison calculator handles term loans directly, and the invoice finance cost calculator handles receivables.
Part 3: Cash flow
- Repayment size. Can the business carry it in its worst month?
- Frequency. Does it match how income arrives? See our guide to repayment frequency.
- Start date. Do repayments begin before the money has done its job?
- Balloon. Is there a lump sum at the end, and how will it be paid?
Part 4: Risk
- Security. What can the lender claim? A specific asset, all business assets, a property?
- Guarantees. Who is personally liable, and is it limited?
- Default terms. Are default events reasonable and clearly defined?
- Covenants. What ongoing promises must you keep?
Our guides to security and GSAs and personal guarantees explain these in depth.
Part 5: Flexibility and exit
- Extra repayments and redraw. Can you pay down early and draw again?
- Variations. Can you change the term or repayments if circumstances change?
- Early exit. What would it cost to leave halfway? Our payout guide explains what to ask.
Part 6: Practicalities
- Speed. When can funds realistically arrive?
- Certainty. Is the approval firm or heavily conditional?
- Conditions. What must happen before funding?
- Service. Who is your contact, and how responsive have they been so far?
Scoring options
When options are close, give each a score out of five on each part and weight the parts that matter most to you. A business with thin margins might weight cash flow heavily; an owner wary of risking the family home might weight risk heavily. The point is not precision but making trade-offs visible.
An illustrative comparison
A made-up wholesaler compares a term loan, a line of credit and invoice finance for a recurring gap. The term loan fits poorly because the need recurs. The line of credit fits well and costs least at realistic usage, but requires a GSA. Invoice finance fits and scales with sales but costs more at the business’s current debtor days. The owner chooses the line of credit and negotiates the GSA to exclude vehicles, which are financed elsewhere.
Use it on a single offer too
Even with only one offer, working through the checklist shows you which questions to ask and what to negotiate. Many owners discover a clause they would not have read otherwise.
Keep a copy
Once you have chosen, keep your completed checklist with the loan documents. It records why you made the decision and what you were promised, which is useful at review time or if a dispute ever arises.
Revisiting the checklist each year
Business needs change. A facility that fitted well two years ago may now be too small, too expensive or too restrictive. Running your existing finance through the checklist once a year, around the time you finalise annual accounts, is a quick way to spot when it is time to renegotiate or refinance.
Comparing finance with not borrowing at all
Every comparison should include one more column: the option of not borrowing, or borrowing less. Could the need be met by faster collections, a supplier extension, selling surplus stock or delaying a purchase? What would waiting cost? Sometimes the honest answer is that finance is clearly worth it; sometimes the checklist reveals that a cheaper non-finance fix does most of the job. Including the option of not borrowing keeps the decision grounded in what the business actually needs.
Common traps the checklist catches
- An option that is cheap but requires security over the family home.
- A facility that fits today’s need but has a review date just before your busy season.
- A lease that looks affordable until the residual is added back in.
- A short-term loan whose daily repayments clash with monthly customer payments.
- An offer with conditions that cannot be met before your deadline.
Want an option to add to your comparison?
If you are comparing finance and want to see what else might fit, make one enquiry. There is no credit check when you first enquire, a real person reviews it and your details go to one lending partner rather than a list. Tell us the options you are weighing in your enquiry and any alternative can be checked against the same list.
Frequently asked questions
How do I compare a line of credit with a term loan?
Estimate how much and for how long you would actually draw on the line, then compare its cost for that usage with the term loan's total cost. Lines are often cheaper for intermittent needs and dearer if fully drawn all the time.
What matters more, price or terms?
Both, but terms decide your risk. A small saving is rarely worth a much broader security or guarantee. Weigh them together.
Should I score options?
A simple score out of five for each checklist item can help when options are close. Weight the items that matter most to your business.
Is it worth comparing if I only have one offer?
Yes. Running one offer through the checklist highlights questions to ask and terms to negotiate, even without a competitor.
Can I use this checklist for leases and invoice finance?
Yes. The same questions apply, though you may need to estimate usage or customer payment times to work out the cost.
Sources and further reading
We are an information site, so we do not rank lenders, publish interest rates or accept payment to feature a product. Every page is written and checked by our editorial team against official sources. Read our editorial policy and how we are funded.
