Glossary · Business Finance

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Annual Percentage Rate (APR) Meaning

An annual percentage rate is the yearly cost of borrowing expressed as a percentage, so that offers priced in different ways can be compared on the same footing. Business finance is priced in several forms, including interest rates, flat fees and factor rates, and turning each into a yearly figure is the most direct route to comparing the cost of two business loan offers.

How an APR is calculated, and which fees it takes in, can differ from one lender to the next. The figure is most useful when you know what it includes, and least useful when two APRs are built on different assumptions.

An APR is not the same as a comparison rate. The comparison rate is a consumer credit measure: Part 10 of the National Credit Code requires one when a credit provider advertises fixed term credit that is for, or mainly for, personal, domestic or household purposes. Those comparison rate rules do not cover business purpose loans.

Disclosure practice varies between business lenders, so an offer may show a yearly figure, a flat fee, a factor rate or some mix of them. Where a yearly figure is missing, it is reasonable to ask for one. Asking what the figure includes, and whether fees are counted, matters as much as the number itself.

Next step

If you have 2 business loan offers priced in different ways, we can put them on the same yearly footing before you choose. Start with working capital loans, or call 0483 980 567.

FAQs

Is APR the same as a comparison rate?
No. A comparison rate is a consumer credit measure required when credit for personal, domestic or household purposes is advertised. Business purpose loans fall outside those rules, so business offers are compared using a yearly figure such as an APR, or the total repayable.
Why can two loans with the same APR cost different amounts?
An APR is a yearly rate, not a dollar figure. The amount borrowed, the term, the fees counted and how often repayments fall due all change the total paid, so 2 offers at the same APR can cost different sums. See the factor rate to APR worked example.
How is APR different from a factor rate?
A factor rate is a multiplier that fixes the total cost of an advance whatever the term. An APR expresses cost as a yearly percentage, so it moves with the term. Converting one into the other is what makes them comparable.

Reference: ASIC, National Credit Code, asic.gov.au/regulatory-resources/credit/credit-general-conduct-obligations/national-credit-code (re-read 21 September 2026).