Business loan fees explained

The headline cost of a business loan is rarely the whole cost. Fees sit around it: some paid at the start, some every month, some only if something happens. On a long, large loan they may be a small share of the total. On a short loan they can be a big one. This guide from our offer review series lists the fees you are likely to meet and what to ask about each.

Upfront fees

Fee	What it covers	What to ask
Establishment or application	Assessment and setup	Is it deducted from the loan or paid separately?
Documentation	Preparing loan documents	Is it included in establishment?
Valuation or assessment	Valuing property or assets	Who orders it, and is it refundable if declined?
Legal fees	Lender’s solicitors for security documents	Is there a cap or estimate?
Registration and search costs	Title searches, PPSR or land registry	Are these passed on at cost?
Intermediary or referral fees	Paid by you to a third party, if any	Is it disclosed in writing?

When fees are deducted from the advance, you receive less cash but repay the full amount. Always compare offers on cash received.

Ongoing fees

• Monthly account or service fees on term loans and facilities.
• Line or facility fees on lines of credit and overdrafts, often charged on the full limit.
• Annual review fees on some commercial facilities.
• Minimum usage or monthly minimum fees on invoice finance facilities.

Add these up over the full term. A small monthly fee over five years can be a meaningful amount.

Event fees

These only apply if something happens, which makes them easy to ignore and expensive when they hit.

• Dishonour fees when a repayment bounces.
• Late payment fees and default interest while a loan is in arrears.
• Enforcement costs if the lender takes recovery action.
• Variation fees for changing the loan, such as the term or repayment date.
• Early repayment fees or break costs if you repay before the end.
• Discharge fees to release security when the loan ends.

Read our guide to early repayment and payout figures for how exit costs can work.

Why fees matter more on short loans

On a five-year loan, a one-off establishment fee is spread across sixty months. On a six-month loan, the same fee is spread across six. That is why the cost per month of short-term finance can look much higher once fees are included, and why we recommend comparing short-term offers on cost per dollar received and cost per month with the offer comparison calculator.

Ask for a fee schedule

Before signing, ask for a full fee schedule in writing: every fee, when it applies and how much it is. Check it against the contract. If a fee appears in the contract that was not in the schedule, ask about it.

Negotiating fees

Some fees are fixed; others are not. Establishment fees, line fees and legal cost caps can sometimes be negotiated, particularly if you have a strong application, a competing offer or are borrowing a larger amount. A polite request costs nothing. Focus on the fees that make the biggest difference to your total cost.

Tax treatment

Many borrowing costs for business loans may be deductible, although some are spread over several years rather than claimed immediately. The rules depend on the type of cost and your circumstances, so speak to your accountant. The ATO’s guidance on operating expense deductions is a useful starting point.

An illustrative example

A made-up florist compares two offers for the same amount and term. Offer A has a lower repayment but a large establishment fee deducted from the advance and a monthly account fee. Offer B has a slightly higher repayment and no ongoing fee. Adding everything up in the true cost calculator, Offer B costs less in total and delivers more cash on day one. The lower repayment on Offer A had hidden the difference.

Fees that should make you pause

• Large fees requested before you have a formal approval.
• Fees that appear in the contract but were never mentioned.
• Vague “administration” charges with no stated amount.
• Exit fees so high that refinancing is effectively blocked.

Our list of business loan red flags explains why.

Fees on secured versus unsecured loans

Secured loans tend to carry more upfront fees because there is more work to do: the security must be valued or assessed, titles searched, documents prepared by solicitors and interests registered. Unsecured loans usually have simpler setup costs but may carry higher ongoing pricing. Equipment finance sits in between, with documentation and PPSR registration costs but rarely valuation or legal fees. When comparing a secured and an unsecured option, include every setup cost, because on a smaller loan they can close much of the gap between the two.

Keep a fee record

Once the loan starts, keep a simple record of every fee charged. Check statements against the fee schedule, query anything unexpected and note fees your accountant may need at tax time. Errors do happen, and a quick check each quarter catches them early.

Want a clear view of the costs?

If you are comparing offers and want to understand the full cost of each, 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. Share the fee details you have in your enquiry and ask about anything that is unclear.