Business Loan Comparison Calculator

How to Compare Business Loans in Australia

When comparing business loan options, the headline interest rate is only part of the picture. Establishment fees (also called application or setup fees), ongoing monthly account-keeping fees, and the repayment structure all affect the total cost of borrowing. Two loans with identical interest rates can differ significantly in total cost once fees are factored in.

The comparison rate (required by law for consumer credit under the National Consumer Credit Protection Act 2009) incorporates standard fees into a single annual percentage for easier comparison. However, for business lending, comparison rates are not always disclosed. This calculator helps you compare the true total cost of each loan option including all fees.

Principal and interest (P&I) loans reduce the outstanding balance with every payment - meaning you pay less total interest over the life of the loan. Interest-only loans keep repayments lower during the interest-only period but require the full principal to be repaid at maturity (or refinanced). Interest-only structures are common for lines of credit and short-term bridging finance.

Common Australian business loan types

• Secured term loan: Lowest rates (typically 6-9% p.a.), requires property or significant asset security. Terms of 3-15 years.
• Equipment / chattel mortgage finance: Asset-secured by the equipment itself. Moderate rates (7-10% p.a.), terms matching the asset's useful life (3-7 years).
• Unsecured business loan: No security required, faster approval, but higher rates (10-20% p.a.) and shorter terms (1-5 years).
• Line of credit: Revolving facility - draw and repay as needed. Interest charged only on the drawn balance. Rates typically 8-12% p.a.

Tax deductibility of business loan interest

Interest paid on business loans is generally tax-deductible under Division 8 of the Income Tax Assessment Act 1997, provided the borrowed funds are used for income-producing purposes. This means the after-tax cost of your loan is lower than the gross interest rate suggests. For a business on a 25% tax rate, a 10% interest rate has an effective after-tax cost of 7.5%. Establishment fees may also be deductible - either immediately or amortised over the loan term depending on the amount. Always confirm the correct treatment with your tax adviser.

Tips for getting the best business loan rate

1. Maintain clean financials - lenders assess your last 2 years of tax returns and BAS lodgement history.
2. Offer security if possible - even a partial guarantee can reduce rates by 2-4% compared to unsecured.
3. Compare at least 3 options from different lender types (major bank, specialist lender, fintech).
4. Negotiate fees - establishment fees are often negotiable, especially for existing customers.
5. Consider the total cost over the full term rather than just the monthly repayment amount.