Business loan fees, explained

Two loans with the same amount and term can cost very different sums once fees are included. Some lenders load cost into fees and keep pricing low; others do the opposite. This entry lists the fees you’re likely to see, explains what each pays for, and shows how to compare offers honestly.

What fees come with setting up a loan?

Fee	What it covers	Notes
Establishment or application fee	Assessing and setting up the loan	Often deducted from proceeds
Valuation fee	The lender’s valuation of property security	Varies with valuation type and property — see property valuations
Lender’s legal fees	Preparing loan, mortgage, caveat and guarantee documents	Usual in secured and private lending
Your legal fees	Independent advice for you and any guarantors	Often required for guarantors
Registration and search fees	Land registry, PPSR registrations and title searches	Passed on at cost as disbursements
Broker fee	Arranging the loan, where charged	Should be disclosed up front
Prepaid interest	Interest paid in advance, deducted at settlement	Common in short-term lending

Because short-term loans spread these costs over fewer months, fees make up a bigger share of their total cost than they do on a five-year loan.

What fees apply while you hold the loan?

• Line or facility fees on revolving limits, charged on the limit whether or not you draw it. See line of credit.
• Monthly or annual account fees.
• Annual review fees for facilities reviewed each year.
• Drawdown fees on some lines of credit.
• Dishonour fees when a repayment bounces.
• Overlimit fees if a revolving facility exceeds its limit.
• Variation fees for changing the loan’s terms, security or borrowers.

What fees apply when you finish?

• Discharge fees to release a mortgage, caveat or PPSR registration.
• Early repayment fees or break costs on some fixed-term loans.
• Minimum-term interest, where a set amount of interest is payable however early you repay.
• Extension fees if a short-term loan needs more time.

These are the fees most often overlooked when comparing offers, and they’re the ones that decide whether repaying early actually saves money.

How do you compare offers fairly?

Build a simple total-cost comparison for each offer:

1. Loan amount received — after any fees or prepaid interest deducted at settlement.
2. All set-up costs you pay separately.
3. Interest and ongoing fees over the period you realistically expect to keep the loan.
4. Exit costs at the point you expect to repay.
5. Total repayable — the sum of everything you’ll hand over.

Compare the totals against the amount you actually receive. Run it twice: once for your expected timeline and once for a delayed one. An offer that looks cheaper when everything goes to plan can be dearer if you need an extension.

If you’d like help laying offers side by side, you can ask a specialist — there’s no credit check to enquire.

Which fee terms deserve extra scrutiny?

Term	Question to ask
Minimum term	How much interest do I pay if I repay in month two?
Default fees and default interest	Exactly when do they apply, and how are they calculated?
Extension terms	What does another month cost if my exit is late?
Fees “payable on demand”	Which fees can be charged at the lender’s discretion?
Costs clauses	Am I liable for all the lender’s enforcement costs?

Small business loan contracts are covered by unfair contract terms laws, which ASIC administers, but the best protection is still understanding the fee schedule before you sign.

Are fees negotiable?

Sometimes. Establishment fees, line fees and some legal costs can occasionally be reduced for strong applications, larger facilities or repeat borrowers. Registration and search fees are third-party costs and generally aren’t negotiable. The more useful negotiation is often about structure: removing a minimum term, shortening an extension period’s cost or aligning the review date with your accounts. If an offer includes a fee you don’t understand, ask what it pays for before you accept it.

Terms used in this entry

• Establishment fee — the one-off charge for setting up a loan. Glossary →
• Facility fee — a charge for keeping a limit available. Glossary →
• Break costs — charges for ending a fixed arrangement early. Glossary →
• Disbursements — third-party costs passed on at cost. Glossary →

Worked example (illustrative)

Illustrative only. A business owner compares two six-month property-secured loans for the same amount. Offer A has a lower establishment fee but a six-month minimum interest term. Offer B charges a higher establishment fee but no minimum term.

She expects to repay after three months when a contract payment lands. Under Offer A she’d pay six months of interest regardless; under Offer B, only three. Once she totals everything, Offer B costs less for her expected timeline — even though its headline fee was higher. If her payment were delayed to month six, the two would be close. The comparison takes ten minutes and changes the decision.

Want offers you can compare properly?

Understanding fees is the fastest way to avoid an expensive surprise. Our enquiry takes about a minute and there’s no credit check when you first enquire. We don’t auction your details to a list of lenders — a real person reviews your situation and calls you with options explained in full. Please tell us how long you expect to need the funds as accurately as you can, so we can match a structure that suits your timeline first time.

See if you qualify →