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, ongoing monthly account-keeping fees, and the repayment structure all affect the total cost. 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. However, for business lending, comparison rates are not always disclosed. This calculator shows the true total cost of each option including all fees.

Worked example: AU$250,000 equipment purchase, 3 options

A Brisbane manufacturing business needs AU$250,000 to purchase a CNC milling machine. They have three loan offers:

The major bank is cheapest overall (AU$50,900 total cost) but requires property security and takes 3-4 weeks to settle. The equipment finance option costs AU$7,530 more but settles in 5-7 days and the machine itself is the security. The fintech option costs AU$14,332 more and has higher monthly repayments, but approves in 48 hours with no security required. The right choice depends on whether the business has security to offer, how quickly they need the equipment, and whether the higher monthly repayment on a shorter term fits their cash flow.

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). The equipment appears on your balance sheet and you claim depreciation.
• 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. Best for managing cash flow gaps rather than asset purchases.

Tax deductibility of business loan costs

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. For a business on a 25% tax rate, a 10% interest rate has an effective after-tax cost of 7.5%. Establishment fees may be deductible immediately or amortised over the loan term depending on the amount. Always confirm the correct treatment with your tax adviser.

For equipment purchases, the asset itself is depreciable. Under the instant asset write-off (for businesses with turnover under AU$10 million), assets costing less than the applicable threshold can be written off in the year of purchase. For larger assets, the diminishing value or prime cost method applies over the asset's effective life.

Tips for getting the best rate

1. Maintain clean financials. Lenders assess your last 2 years of tax returns, BAS lodgement history, and bank statements. Late BAS lodgements or ATO debts are red flags.
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, and fintech.
4. Negotiate fees. Establishment fees are often negotiable, especially for existing banking customers.
5. Focus on total cost over the full term, not just the monthly repayment. A lower monthly payment over a longer term can cost more in total interest.

Frequently asked questions

What is the difference between principal and interest vs interest-only?

Principal and interest (P&I) loans reduce the outstanding balance with every payment, meaning you pay less total interest. Interest-only loans keep repayments lower during the interest-only period but require the full principal to be repaid at maturity or refinanced. P&I is cheaper overall. Interest-only is useful for short-term bridging or when cash flow is tight in the early months.

Is business loan interest tax-deductible?

Yes, provided the loan funds are used for income-producing business purposes. The interest is deductible in the year it is incurred. Establishment fees may be deductible immediately or amortised, depending on the amount. Personal guarantees or mixed-purpose loans have different treatment and should be discussed with your tax adviser.

How do I manage loan repayments alongside supplier payments?

Cash flow visibility is key. When your AP commitments (supplier invoices, contractor payments, loan repayments) are visible in a single dashboard, you can plan payment runs to avoid cash crunches. AP automation gives you that visibility by tracking all payables in one place with due dates and payment status.