What Does a Working Capital Loan Cost? Factor Rates, Fees, Repayments
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Working Capital Loan Costs · Factor Rate to Annualised Rate Calculator · Australian Business Borrowers
One lender quotes a rate, the next quotes a factor, the third quotes a flat fee. None of those numbers are comparable as written. This guide turns them into the same set of numbers, then checks the repayment schedule, payout terms, top-up treatment and security around the price.
Quick Answer
A working capital loan's cost is price plus fees, annualised. Banks charged small businesses 7.44 per cent a year on new loans in July 2026; accredited online lenders start from 15.5 per cent APR; a 1.20 factor repaid weekly over 12 months is about 37 per cent annually.
Also called: working capital loan rates, business cash flow loan costs, short term business loan fees, the true cost of a business loan.
What does a working capital loan cost in Australia?
The dollar cost of a working capital loan is the interest, factor or flat fee plus any separate fees. The term and repayment frequency then determine how expensive that cost is on an annualised basis and how hard the debits hit cashflow. That is different from the accounting cost of carrying stock, waiting on debtors and paying suppliers before cash comes back. This page is about the finance, not that accounting measure.
The price arrives in one of three units. Some lenders quote an interest rate a year on the balance still outstanding. Some quote a factor, which is a multiplier applied once to the amount advanced. Some quote a flat fee, in dollars or in cents in the dollar. All three describe a cost. None of them describe the same cost, and a business owner who compares them as written will usually pick the wrong offer.
The fees are the part most people underprice. An establishment fee, a drawdown fee, a line fee on an undrawn limit, a dishonour fee, a late fee and a default fee can sit inside the quoted price or on top of it, and the combination can materially change the dollars you actually pay. The working capital loan explainer covers what the facility is and what it is for. This page covers what it costs. Read that cost against your own cashflow cycle, because a facility debited weekly out of trading income behaves very differently from one repaid monthly.
| Facility | How the price is usually quoted | What to convert before comparing |
|---|---|---|
| Short term business loan | An interest rate on the balance, or a factor or flat fee on the full advance | The total repayable in dollars, annualised over the real term and debit schedule |
| Business line of credit | An interest rate on what you draw, often with a line fee on the whole limit | Interest at the balance you expect to hold, plus the line fee on the limit |
| Business overdraft | An interest rate on the overdrawn balance, often with a facility fee | Interest at your expected average overdrawn balance, plus the facility fee |
| Merchant cash advance | A factor on the amount advanced, repaid from a share of takings | The total repayable in dollars, annualised over how long your takings will take to clear it |
| Invoice finance | A fee on the invoices funded, sometimes with a service fee on top | The fees in dollars against how long each invoice stays unpaid |
What do Australian small businesses actually pay for short term finance?
Banks and other deposit takers charged Australian small businesses 7.44 per cent a year on new loans in July 2026, the lowest starting rate published by an accredited online small business lender was 15.5 per cent APR when read on 21 September 2026, and no official series measures short term unsecured non bank lending at all. That gap is worth understanding before you benchmark an offer against anything. The official interest rate series covers authorised deposit-taking institutions, including banks, and the official new commitments series for business covers only two purposes, construction and purchase of property. A twelve month unsecured facility from a non bank lender appears in neither.
What is published falls into two groups. The RBA series is a broad benchmark for small business loans held by banks and other deposit takers; it is not a floor and it is not a proxy for a short term non-bank offer. July 2026 was still the latest month displayed on the RBA lenders' rates page when rechecked on 21 September 2026. Individual lender websites sometimes publish starting rates, but a starting rate is not the price on your file. Between those two sits much of the short term market, priced per application. That is also why a comparison against low documentation business lending needs to account for the evidence required as well as the headline price.
| What is measured | Figure | Source |
|---|---|---|
| Small business, new loans, banks and other deposit takers | 7.44 per cent a year | RBA Statistical Table F7, July 2026 data |
| Small business, outstanding loans, same basis | 7.46 per cent a year | RBA Statistical Table F7, July 2026 data |
| Large business, outstanding loans, same basis, for the size gradient | 5.74 per cent a year | RBA Statistical Table F7, July 2026 data |
| Lowest starting rate published by an accredited online small business lender | 15.5 per cent APR, a starting rate, not an offer | Accredited online small business lender websites |
| Establishment fees published as a percentage of the amount advanced | One, at 2 per cent upfront | Accredited online small business lender websites |
| Accredited online lender pricing pages publishing any rate at all | 2 of the 4 that returned readable content; the rest price per application | Accredited online small business lender websites |
| Official series covering short term unsecured non bank business lending | None | RBA F7 covers deposit takers only (sourced from APRA and the RBA); ABS Lending Indicators, June quarter 2026, released 14 August 2026, covers construction and purchase of property only |
How is a factor rate different from an interest rate?
A factor rate is a multiplier applied once to the amount advanced, while an interest rate accrues on the balance still outstanding. With a factor-priced facility, advance multiplied by factor gives the scheduled total repayable, but the amount required to exit early depends on the contract and any rebate, discount or payout terms. With a reducing-balance interest rate, cost changes with time and balance, although minimum-interest, break or exit costs can still affect an early payout.
The reason a factor can look smaller than a reducing-balance interest rate is arithmetic. The factor is applied to the full advance, even though repayments start reducing the amount you have use of from the first instalment. An interest rate is applied to the balance still outstanding. Once time and repayment cadence are included, the annualised cost of a factor-priced offer can be materially higher than its flat percentage suggests. The definition of a business loan does not tell you which pricing method a lender uses, so check the unit on every offer.
The table below is the comparison the fragments rarely make in one place. It is about mechanics, not about which is better. A flat fee facility can be the right answer for a short, defined gap. An interest bearing facility is usually the right answer for anything you might repay early.
| What you are comparing | Factor rate or flat fee | Interest rate |
|---|---|---|
| What the number is applied to | The full amount advanced, once | The balance still outstanding |
| Does the cost accrue over time | No, it is fixed when you sign | Yes, on a reducing balance |
| Does repaying early reduce it | Not necessarily; it depends on the lender's rebate, discount and payout terms | Often, but minimum-interest, break, exit or fixed-rate payout costs can reduce the saving |
| How it is normally quoted | A multiplier, or cents in the dollar | A percentage a year |
| How you read a twelve month quote | Multiply the advance by the factor to get the total repayable | Apply the rate to the balance in each period |
| Comparable to another lender as quoted | No, not until you convert it | Only if the basis matches |
| What makes the number look small | It is spread over the whole advance, not the balance you hold | A headline rate quoted without the fees around it |
| Where the fees usually sit | They may be inside the factor, deducted upfront, or charged separately | They may sit outside the quoted rate and need to be added for a fair comparison |
| How to make it comparable | Work out the total cost, then annualise it over the term | Add the fees to the price, then annualise |
How do you turn a factor rate or a flat fee into an annualised cost?
You convert by turning the offer into the cash that arrives and the cash that leaves, then solving for one annualised rate across that real schedule. That is more accurate than simply doubling a flat percentage, and it lets a factor, a fixed total and an interest-rate offer sit beside each other on the same basis.
Step one: work out the net cash you actually receive after any upfront fee is deducted. Step two: write down every scheduled repayment and the real frequency. Step three: calculate the periodic rate that makes the present value of those repayments equal the net cash received, which is an internal-rate-of-return calculation. Step four: annualise that periodic rate using the number of repayment periods in a year. The calculator below does those steps for equal instalments and returns a nominal annualised rate.
Keep the dollar total beside the annualised rate. The annualised figure tells you how expensive the money is for the time you hold it; the total repayable tells you how many dollars leave the business if you run the facility to schedule. Where the facility is standing in for an ATO debt carrying the general interest charge, compare both the dollars and the annualised cost of the two paths.
Assumptions, all stated: $50,000 advanced; priced as a factor of 1.20; a twelve month term; 52 equal weekly instalments; no fees outside the factor; no early repayment; every instalment paid on time.
Total repayable is $50,000 multiplied by 1.20, which is $60,000. The cost of credit is $10,000. As a flat share of the advance that is 20 per cent over twelve months. Using the 52 scheduled cash flows, the same $10,000 works out to roughly 37 per cent a year as a nominal annualised rate on the balance actually outstanding. Same dollars, two very different looking numbers: the $10,000 tells you the total cost to schedule, while the annualised rate lets you compare the time-adjusted cost with a reducing-balance rate.
This example is illustrative only. It is not a quote, not an offer and not a lender price. Figures are arithmetic on the stated assumptions and nothing else.
What is your offer's annualised rate? Factor rate and interest rate calculator
Enter the amount advanced, then choose a factor, a fixed total repayable, or an annual interest rate on a reducing balance. Add any upfront fee, the term and the repayment frequency. The calculator returns the net cash received, total cost, repayment amount and an estimated nominal annualised rate on the actual cash flows.
Run every offer on its real schedule. A quoted interest rate with an upfront fee can have a higher annualised cost than the rate printed on the offer because you receive less usable cash while still repaying the full advance.
Business loan offer translator
Arithmetic only, on the numbers you enter. It assumes equal repayments starting one period after drawdown, no early repayment, every repayment on time, and no fees other than the ones you enter. The annualised figure is a nominal cash-flow comparison rate, not a consumer-credit comparison rate or a statutory APR. In interest-rate mode, the entered annual rate is treated as a nominal reducing-balance rate divided across the selected repayment periods. Upfront fees reduce the cash you actually receive. Not a quote, not an offer and not financial advice.
How do you compare two working capital loan offers?
Compare the same seven things on both offers: net cash received, total dollars repaid, repayment amount and frequency, term, annualised cost, early-payout treatment, and the security or guarantee you give. A lower total dollar cost can still come with a much heavier weekly debit and a higher time-adjusted cost.
The example below deliberately uses two offers for the same $50,000 advance. Offer B costs fewer dollars if both run to schedule, but it takes the money back twice as fast. That is why the decision cannot be made from the factor or the total repayable alone.
| Compare | Offer A | Offer B | What the difference means |
|---|---|---|---|
| Quoted price | 1.20 factor | 1.16 factor | Offer B looks cheaper from the headline number |
| Term and debit | 12 months, 52 weekly debits | 6 months, 26 weekly debits | Offer B takes the money back in half the time |
| Total repayable | $60,000 | $58,000 | Offer B costs $2,000 fewer dollars if both run to schedule |
| Weekly debit | $1,153.85 | $2,230.77 | Offer B removes almost twice as much cash from the business each week |
| Nominal annualised rate | About 37.0 per cent | About 58.9 per cent | Offer A is lower on the time-adjusted cash-flow basis |
| Early payout, top-up, security | Not assumed | Not assumed | Ask both lenders; the headline price does not tell you these terms |
Offer B uses fewer total dollars; Offer A has the lower annualised cost and the lighter weekly debit. Which structure fits depends on what the money is doing, how quickly the cash comes back into the business, and what each contract says about payout, top-up and security. The figures are illustrative arithmetic only, not lender offers.
Do Australian business loans have to show a comparison rate or APR?
No, not generally for credit provided wholly or predominantly for business purposes. ASIC's National Credit Code guidance says the consumer comparison-rate rules apply to advertised fixed-term credit for personal, domestic or household purposes. A working capital facility used wholly or predominantly for business purposes generally sits outside that consumer comparison-rate regime.
That does not mean a business borrower should compare the headline rate, factor or fee as written. Ask for the amount advanced, the net cash you actually receive after upfront fees, the total repayable, the repayment amount and frequency, the term, every fee that can apply, and the written early-payout treatment. Then put both offers on the same annualised cash-flow basis.
Some industry-code members give more standardised pricing information voluntarily. As read on 21 September 2026, AFIA says its Online Small Business Lenders Code gives borrowers the SMART Box, which compares lenders' pricing using metrics standardised in calculation and presentation, with a loan summary before a loan is accepted. The published Australian SMART Box template shows the disbursement amount, the total repayment amount and an annual rate on the reducing balance. That is an industry-code disclosure, not the same thing as the statutory consumer comparison-rate regime.
Sources read 21 September 2026: ASIC, National Credit Code, comparison rates section (updated 1 August 2025); AFIA, Online Small Business Lenders Code page; Australian SMART Box template. General information only. Whether a particular facility falls within a law or code depends on the borrower, purpose, product and provider.
Why do daily or weekly repayments change what you really pay?
Repayment frequency can change both the financing cost and the pressure on your trading account. On a reducing-balance rate, more frequent principal repayments generally reduce the balance sooner, although the exact total depends on the contract and rate basis. On a fixed total, flat fee or factor structure, changing the debit frequency does not by itself reduce the contractual total unless the lender gives an early-payout or other discount.
The second effect is the one that catches businesses with lumpy income. A daily debit on business days can mean roughly twenty withdrawals a month from an account that may only refill when customers pay. A business with thirty day or sixty day debtors can therefore have a facility that looks affordable in total but competes with payroll, suppliers or tax before the next debtor receipt arrives. That is a cash-cycle question, not just a pricing question, and it is worth checking before you compare the loan with a revolving option such as a business overdraft and its rates and fees.
What happens if a daily or weekly business loan repayment fails?
A failed automatic debit can create a second layer of cost, but the exact consequence is lender-specific. Depending on the contract, a dishonoured debit can trigger a dishonour fee, late or default charges, default interest, or a further debit attempt. Before signing, ask exactly when a missed debit becomes a default, whether the lender retries the debit, how many times it may be retried, what each failed attempt costs, and who to contact before the due date if the account will be short.
Published business lending fee schedules commonly list dishonour fees, default interest and overdrawing charges. That is a pattern, not a statement that every lender uses the same triggers or retry process. Your own contract controls.
| How the facility is priced and debited | Effect on the total you repay | Effect on the cash going out |
|---|---|---|
| Rate on the balance, monthly debits | Depends on the rate basis and amortisation | 12 scheduled withdrawals a year |
| Rate on the balance, weekly debits | Can be lower if principal falls sooner | 52 smaller scheduled withdrawals a year |
| Rate on the balance, daily debits | Can be lower if principal falls sooner | Roughly 20 business-day withdrawals a month |
| Fixed total, flat fee or factor, monthly debits | No automatic change to the contracted total | 12 scheduled withdrawals a year |
| Fixed total, flat fee or factor, weekly debits | No automatic change to the contracted total | The same total leaves the business sooner |
| Fixed total, flat fee or factor, daily debits | No automatic change to the contracted total | The tightest cadence for a lumpy trading account |
Take a normal low-trading week, not your best week. Start with the cash you expect to have after wages, rent, tax and essential suppliers, then subtract the proposed loan debits. Now move a major customer receipt seven days later. If the repayment only works when every debtor pays on time, or you would need another facility to make the debit, the schedule may not fit even if the total cost is acceptable.
Business.gov.au recommends working out the maximum repayment the business can afford and using cashflow information before borrowing. This stress test is practical arithmetic, not a lender serviceability assessment.
What fees can a lender charge beyond the rate?
A lender can charge an establishment or origination fee, a drawdown fee on each advance, a line or facility fee on an undrawn limit, a dishonour fee when a debit fails, a late fee, and a default fee if the facility goes into default. Some sit inside the quoted price and some sit on top of it, and the only reliable way to tell is to ask for the total repayable in dollars.
Here is the part almost nobody puts on a page. Those fees are not all equally fixed. Under the unfair contract terms law, the terms that set the upfront price of a small business contract cannot themselves be found unfair, and ASIC gives the amount borrowed, the interest rate and an establishment fee disclosed when the contract is entered into as examples of that upfront price. Contingent fees are different. Late fees and other fees that only bite if something happens are subject to the law and can breach it. That means an establishment fee disclosed as part of the upfront price is treated differently under the unfair contract terms test from a fee that only arises if something happens later. A contingent fee can still be challenged if the term is unfair, but a high fee is not automatically unlawful and other legal rules may also matter.
Practically, separate the offer into two columns before you sign: amounts you will pay if everything goes to schedule, and amounts that only arise after an event such as a dishonoured debit, late payment, default, variation or exit. Read the triggers on the second column as carefully as the rate. Then check the non-price terms as well: what security is taken, whether a PPSR registration is involved, and whether you are signing a personal guarantee. The unsecured business loan security guide covers that risk separately.
What the unfair contract terms law does and does not reach
- $5mThe upfront price payable cap. A contract for a financial product or service is a small business contract only if the upfront price payable does not exceed $5,000,000, and interest is disregarded when working out whether a contract is under that cap. ASIC Information Sheet 211, Unfair contract term protections for small businesses, information sheet updated March 2025, read 21 September 2026. General information, thresholds change; check the current sheet before relying on it.
- 100The size test. At least one party must employ fewer than 100 people, counting casual and part time staff as full time equivalents, or have an annual turnover below $10,000,000. ASIC Information Sheet 211, same read, 21 September 2026. A threshold, not advice on whether your contract qualifies.
- NoThe amount borrowed, the interest rate and an establishment fee disclosed when the contract is entered into are upfront price terms, and cannot themselves be considered unfair. ASIC Information Sheet 211, same read, 21 September 2026. Whether a particular term is an upfront price term is a question about that contract.
- YesLate fees and other contingent fees are subject to the unfair contract terms law and could breach it. ASIC Information Sheet 211, same read, 21 September 2026. A fee being capable of challenge is not a finding that any particular fee is unfair.
Read on 21 September 2026 at asic.gov.au. These are general thresholds and principles, not an assessment of any contract you have been offered. A court or tribunal decides whether a term is unfair.
What are the repayments on a $50,000, $100,000 or $200,000 business loan?
At 7.44 per cent a year over five years with monthly repayments, a $50,000 business loan repays about $1,000 a month, $100,000 about $2,001 a month and $200,000 about $4,002 a month. The repayment depends entirely on the rate, the term and the frequency, so the only useful answer is one with every assumption written next to it. The figures below assume a five year term, equal monthly repayments, and a price of 7.44 per cent a year on the reducing balance, which is the RBA figure for new small business lending in July 2026 used purely as a stated assumption rather than as a price anyone is offering you.
Two things are worth noticing. Repayments scale exactly with the amount on the same rate and term, so doubling the loan doubles the repayment and doubles the interest. And the term does more work than most borrowers expect: the same $50,000 at the same rate over three years costs around $5,942 in interest instead of around $10,028, with a monthly repayment around $1,554 instead of around $1,000. Longer term, smaller repayment, more total cost. That trade is the whole decision on a business loan, and it is a cash flow judgment before it is a pricing one.
| Loan and term | Monthly repayment | Total repaid | Total interest |
|---|---|---|---|
| $50,000 over 5 years | $1,000 | $60,028 | $10,028 |
| $100,000 over 5 years | $2,001 | $120,057 | $20,057 |
| $200,000 over 5 years | $4,002 | $240,113 | $40,113 |
| $50,000 over 3 years | $1,554 | $55,942 | $5,942 |
Assumptions, all stated: a five year term; equal monthly repayments; 7.44 per cent a year on the reducing balance; no fees; no early repayment; every repayment made on time.
On $50,000 the repayment is around $1,000 a month, around $60,028 repaid in total, around $10,028 of that interest. On $100,000 it is around $2,001 a month, around $120,057 repaid, around $20,057 interest. On $200,000 it is around $4,002 a month, around $240,113 repaid, around $40,113 interest.
Set that against worked example one. A $50,000 facility priced as a factor of 1.20 over twelve months also costs around $10,000, and it costs it in one year rather than five. The dollar figure alone tells you almost nothing until you attach the term to it.
Illustrative only. Not a quote, not an offer, and no lender is named or implied. Figures are arithmetic on the stated assumptions.
What must a lender show you before you sign?
Where credit is provided wholly or predominantly for business purposes, the National Credit Code consumer-disclosure regime generally does not apply. What you receive before signing therefore depends on the applicable law, the contract and any industry code the lender has joined. As at 21 September 2026, accredited online small business lenders have specific pricing-disclosure commitments, and the broader AFIA Finance Industry Code of Practice is due to take full effect on 1 October 2026.
As read on 21 September 2026, an accredited online small business lender is bound by the Online Small Business Lenders Code of Practice, whose whole point is a standardised pricing summary given to you before you accept, so that two lenders can be compared on metrics calculated and presented the same way. From 1 October 2026 the broader AFIA Finance Industry Code of Practice takes effect, and its pre contract obligation is a list: product terms and conditions, fees and charges, interest or else the total amount payable and the repayment amount, any other pre contractual disclosure the law requires, and how you will be told about changes. Note the carve out in the middle, because it matters for a revolving facility: where the total to be repaid depends on how you use the limit, the total and the repayment amount cannot be stated.
AFIA says its members are in transition until the new Code takes full effect, and that accreditation is conducted independently by the Finance Industry Code Compliance Committee. As read on 21 September 2026, AFIA's Online Small Business Lenders Code page still lists its code-compliant lenders and publishes no retirement date for that Code, so if a lender tells you which code it follows, check that code's page rather than assuming one replaced the other.
Those code commitments bind members, not every commercial lender, so ask which code applies rather than assuming one does. If you are comparing a working capital facility against a turnover-based advance, the different disclosure and repayment mechanics are part of the comparison, covered in merchant cash advance against a working capital loan. Before applying, also know what lenders look for in business bank statements, because different lenders can ask for different evidence and price the file differently.
Which code binds an online small business lender, and when
- 2018The Online Small Business Lenders Code of Practice was launched in June 2018 and remains the code an accredited online small business lender is signed up to. From 1 January 2026 it is monitored and supervised by the Finance Industry Code Compliance Committee. AFIA Codes Hub and AFIA Online Small Business Lenders Code page, read 21 September 2026. The Code binds accredited members only.
- 1 OctThe AFIA Finance Industry Code of Practice was published on 16 September 2025 and is effective from 1 October 2026, with compliance subject to transitional arrangements until that date. AFIA Finance Industry Code of Practice, Part A paragraph 1, read at afia.asn.au 21 September 2026; AFIA media release of 1 May 2026, which confirms full effect from 1 October 2026 and independent accreditation by the Finance Industry Code Compliance Committee. A code in transition; re-check before relying on the date.
- FiveThe five things a Code member says it will give you before you enter into a contract: product terms and conditions; fees and charges; interest, or the total amount payable and the repayment amount, which does not apply to revolving facilities; any other pre contractual disclosures required by law; and how you will be notified about changes. AFIA Finance Industry Code of Practice, paragraph 33, read 21 September 2026. Effective 1 October 2026, and only for Code members.
Read on 21 September 2026 at afia.asn.au. Code obligations apply to accredited members. They are not law, and they are not a substitute for reading the contract you are offered.
What should you ask a lender before you sign?
Ask for the total repayable in dollars, how the price is calculated, how often repayments come out, what paying out early or topping up does to the cost, what the contingent fees are, what security is taken, and whether the lender belongs to AFCA and to an industry code. Get every answer in writing, and in dollars wherever a dollar figure exists. If the offer carries an expiry date, that is a reason to ask these faster, not a reason to skip them.
- How much cash will actually land in my account after upfront fees, and what is the total repayable in dollars if every repayment is made on time?
- Is the price an interest rate on the balance, a factor on the advance, or a flat fee?
- How often do repayments come out, on which days, and from which account?
- If I pay the loan out early, what is the payout figure in dollars, and is any unearned cost rebated?
- If you later offer a top up, is the unearned cost on this loan rebated, discounted or carried into the new total?
- What are the dishonour, late and default fees in dollars, and what triggers each one?
- What security are you taking, will you register an interest on the PPSR, and do you need a personal guarantee?
- Are you a member of the Australian Financial Complaints Authority, and of an industry code? Which one?
- To the broker: who pays you on this deal, and is any of it added to what I repay?
- To your accountant, not the lender: how will the interest, the fees or the factor cost be treated in my business accounts and tax return?
Paste the answers into the calculator above and the offer becomes one number you can compare. Before you apply at all, know what lenders read in your bank statements, because the evidence you send shapes the price you are offered.
How is a broker paid on a business loan?
The FBAA describes finance brokers as generally paid by the lender through an upfront commission at settlement and a trailing commission while the loan runs. Its published general ranges are 0.55 per cent to 0.65 per cent of the loan amount upfront and 0.15 per cent to 0.25 per cent a year as trail, while noting that remuneration varies by loan type, lender and broker. The FBAA also says charging the customer is not standard industry practice and that any client fee must be disclosed before the client engages the broker.
The part that needs stating plainly is what does not apply. The best interests duty sits in Part 3-5A of the National Consumer Credit Protection Act and applies to credit assistance provided to a consumer in relation to a credit contract where the licensee is a mortgage broker. The National Credit Code only reaches credit where the debtor is a natural person or a strata corporation and the credit is wholly or predominantly for personal, domestic or household purposes, or to buy, renovate or improve residential property for investment. A working capital facility used wholly or predominantly for business purposes is generally outside both. So the duty that a home loan borrower gets by statute does not automatically carry across to a wholly business-purpose facility; on a commercial file, ask the broker to state the standard they will apply and how they are paid.
Which makes two questions worth asking on any short term business facility: who pays you on this deal, and is any part of what you are paid added to what I repay. Both answers should come in writing and neither should be awkward to give.
Association guidance is not a rule that every commercial broker or short term unsecured deal is paid the same way. A broker may also quote a client-paid mandate, advisory, application or success fee. Ask for every lender-paid commission and every client-paid fee in dollars before you proceed, and ask whether any of it is capitalised into the facility.
Still there on a business purpose loan
- Ask who pays the broker and how much, and ask for it in writing
- Ask whether any commission or fee is added to the amount you repay
- An association member who charges you a fee must disclose it before you engage them
- From 1 October 2026, a Code member gives fees and charges before you contract
- Unfair contract terms protection, where the contract meets the small business test
Does not reach a business purpose loan
- The best interests duty, which covers credit assistance to a consumer on a regulated credit contract
- The National Credit Code disclosure regime, which is limited to personal, domestic, household and residential investment credit
- The published broker remuneration guidance aimed at home lending
- The National Credit Code consumer disclosure and fee regime for wholly business-purpose credit
- A general statutory right to a standardised comparison document for wholly business-purpose credit; some code members make voluntary pricing-disclosure commitments
Sources for this section, all read 21 September 2026: FBAA, About the industry, fbaa.com.au, for the commission shape and the disclosure obligation; MFAA Broker Remuneration Factsheet, mfaa.com.au, whose published guidance addresses home lending; National Consumer Credit Protection Act 2009 section 158L and National Credit Code sections 4 and 5, compilation C52 dated 1 July 2026, read at legislation.gov.au. Commission figures are the association's general description and vary by lender, loan type and broker. This is general information, not legal advice.
When is the cheapest looking offer the expensive one?
A cheap-looking offer can become the expensive or riskier one when the short term, debit frequency, payout rules, top-up treatment or security behind it changes what the headline number leaves out. Compare the economics and the contract behaviour, not just the rate or factor.
The first is term. A shorter term can reduce the total dollars but increase the annualised cost and the amount coming out each week. The second is frequency: even where it does not change a fixed contractual total, it changes how hard the facility hits the trading account. The third is early payout treatment. Ask for a written payout figure, because minimum-interest obligations, break costs, exit fees or the absence of a rebate can make the exit cost very different from the account balance. The guide to what a payout figure contains explains the components.
The fourth is the top up. When a lender increases, refinances or rewrites the facility before the term ends, do not compare the new advance with the new total in isolation. Ask what happens to the remaining or unearned cost on the existing loan, what payout is being deducted, what new fees start again, and how much fresh cash actually reaches the business. Get the answer in dollars before you accept.
The fifth is security and guarantee exposure. Two offers can cost the same dollars and still be very different deals if one takes a broad security interest, a director guarantee or property support and the other does not. That is not an interest charge, but it changes what is at risk if the business cannot repay. Price it separately in your decision rather than pretending a lower rate makes the security irrelevant.
Why can a business loan payout figure be higher than the account balance?
The account balance is not always the amount required to close a facility. A payout can also include interest accrued to the payout date, contractual early-repayment or break costs, discharge or administration fees, and other amounts due under the facility. Ask for a written payout figure with an expiry date before refinancing or accepting a top up, then compare that payout with the fresh cash you will receive and the new total repayable.
Lender discharge processes commonly work from a payout figure that is valid to a stated date, and fixed-rate products can carry break costs on early repayment. Lenders and products use different terms, so read your own contract.
Can an unsecured business loan still have a personal guarantee or PPSR security?
Yes. "Unsecured" does not necessarily mean that the director gives no guarantee or that the lender has no security interest over business assets. A lender can take a personal or director guarantee, or a security interest over personal property such as business assets, without taking a mortgage over land. The PPSR records security interests over personal property, and an All-PAAP registration can cover all present and after-acquired personal property of a business. Read the guarantee and security documents separately from the rate.
Lenders can register security interests over business assets on the PPSR, and an All-PAAP registration commonly covers all present and after-acquired personal property of the grantor. The unsecured business loan security guide covers the legal and enforcement side in more detail.
One thing to say plainly, because it belongs on every page about borrowing for cash flow: borrowing does not fix an insolvent business. If the facility is covering wages, tax or suppliers month after month rather than covering a defined timing gap, the cost of the loan is not the problem you are solving. The Small Business Debt Helpline on 1800 413 828 gives free, independent and confidential advice, and taking it early costs nothing.
From our broking, indicative
Three mistakes account for most of the cheap looking offers we are asked to check, and none of them involve a dishonest lender. All three are unit errors.
- Comparing a factor against an interest rate as though the two numbers were the same unit, without converting either to an annualised basis first
- Assuming the schedule is monthly when the contract debits weekly or daily, and building a cash flow around the wrong number of withdrawals
- Shortening the term to reduce the total dollars without recalculating the annualised cost, which usually moves in the opposite direction
Qualitative only. No indicative rate, band, spread, approval time or turnaround is given here, and none should be inferred. Based on files we have worked on, not a quote and not an offer. Actual terms depend on lender policy and your circumstances at the time of application. Not financial advice.
What should you check after a working capital loan settles?
Check the loan against the contract before the first repayment leaves the account: confirm the net cash that arrived, the first debit date and frequency, the documents that govern payout and security, and whether the repayment schedule still fits the cash cycle you expected. The easiest time to catch a mismatch is before it turns into a dishonour or a rushed top-up.
- Reconcile the amount that landed in the business account against the advance less every upfront fee. If the net cash is lower than the amount the business actually needed, deal with the gap now rather than assuming the unused part of another facility will cover it.
- Put the first four debits into the same cashflow calendar as wages, rent, tax, suppliers and your expected customer receipts. A repayment can be affordable over a month and still fail on the wrong Tuesday.
- Keep the signed offer, repayment schedule, fee schedule, guarantee and security documents together. If you later refinance, sell an asset or dispute a fee, those are the documents you will need to read against the payout figure.
- If a top-up or refinance is offered, compare three dollar amounts before agreeing: the current written payout, the fresh cash that will actually reach you, and the new total repayable. Do not judge the new offer only by the larger approved limit.
- If the debits are already forcing you to delay wages, tax or essential suppliers, contact the lender before the next missed payment and get independent help early rather than using another short-term facility to hide the same gap.
Work out the maximum repayment the business can carry from a cashflow forecast before you borrow, and if repayments start to bite, contact the lender early with current cashflow and financial information ready. General information only.
What should you do next with the offer in front of you?
What to do next depends on where you are. With one offer, translate it and ask the ten questions before you sign. With two or more, compare net cash received, total dollars, annualised cost, debit pressure and exit terms side by side. If the loan has just settled, reconcile the cash and calendar the first debits. With a top up on the table, get the current written payout first. If borrowing is repeatedly covering wages, tax or suppliers, call the Small Business Debt Helpline on 1800 413 828 before adding more debt.
Where are you right now?
Convert it, then ask the ten questions before you sign.
Put the amount, the factor or total repayable, the fees, the term and the debit frequency into the calculator. Then take the ten questions to the lender and get the answers in writing. Last, lay the debit schedule over your own cashflow cycle: a weekly or daily debit that lands before your customers pay is a cost the rate does not show.
One offer is not a comparisonCompare them in dollars and as an annual rate on the same basis.
Run each offer through the calculator on its own real term and debit schedule, then line up four things: total repayable in dollars, the annual rate on the balance you hold, what early payout saves, and how each lender treats a top up. If one of the offers is a turnover based advance, read merchant cash advance against a working capital loan before you decide.
Lower headline, not always lower costGet the unearned cost on the current loan in dollars before you accept.
Ask for the payout figure on the current facility and read what a payout figure actually contains. Then ask whether the flat fee or factor on the original loan is rebated, discounted or carried into the new total, and compare the new total with simply running the current loan to term.
Do not pay for the same money twiceGet your file in order first, because price tracks evidence.
Better evidence and acceptable security can reduce lender risk and may improve pricing, but the cheapest-looking structure is not automatically the best fit. Read what lenders look for in business bank statements, what an unsecured business loan lets a lender take, and how low documentation business lending is priced, then check your eligibility.
Evidence first, application secondReconcile the cash now, before the first debit surprises you.
Check what actually landed in the account, put the first four repayments into the cashflow calendar, and keep the signed offer, fee schedule, guarantee and security documents together. The post-settlement checklist also shows what to compare if a top up or refinance arrives later.
Settlement is the start of the repayment decisionCall the Small Business Debt Helpline on 1800 413 828 before you borrow more.
Borrowing does not fix an insolvent business. If the facility is covering wages, tax or suppliers month after month rather than covering a defined timing gap, the helpline gives free, independent and confidential advice. If the gap is an ATO debt, compare the loan with leaving the debt on the general interest charge before you sign anything, and note that the ATO no longer allows a tax deduction for general interest charge incurred on or after 1 July 2025.
The cost of the loan is not the problem to solveWhat can you do if something goes wrong with a business loan?
Complain to the lender first, then to the Australian Financial Complaints Authority if the lender is a member, and get legal advice if it is not, because a lender that only makes commercial loans does not need a credit licence and does not have to belong to AFCA. That is why AFCA membership is a question to ask before you sign, not after.
ASIC describes commercial loans, including loans to small businesses, as carrying the lowest level of legal protection. What still applies is the general law ASIC administers: unconscionable conduct, misleading or deceptive conduct, and unfair terms in standard form small business contracts are all prohibited, although ASIC notes that courts set a high bar for unconscionable conduct in commercial lending. If the lender belongs to an AFIA code, an alleged breach of that code can also be reported to the code's compliance committee, which monitors the code but does not resolve individual disputes.
Where a business loan complaint goes, in order
- 1stYour lender or broker. Raise it with them directly and in writing first. ASIC Information Sheet 207, Disputes about commercial loans, reissued April 2024, read 21 September 2026.
- AFCAThe Australian Financial Complaints Authority, on 1800 931 678, can resolve small business complaints about commercial lending where the business has fewer than 100 employees and the lender is an AFCA member. ASIC INFO 207 for the scope, and AFIA Online Small Business Lenders Code page for the number, both read 21 September 2026. Whether AFCA can hear a particular complaint depends on the complaint and the firm.
- NoLenders that only provide commercial loans are not required to hold an Australian credit licence and are not legally required to be AFCA members. If yours is not a member, ASIC points you to private legal advice. ASIC INFO 207, read 21 September 2026.
- CodeAn alleged breach of an AFIA code can be reported to the Code Compliance Committee at codes@afia.asn.au. The committee does not resolve individual disputes. AFIA Online Small Business Lenders Code page, read 21 September 2026.
General information about where complaints go, not legal advice. If a lender is taking enforcement action or has appointed a receiver, get independent legal advice early.
The cost of a working capital loan is not the number on the front of the offer. Start with the net cash that actually reaches the business, then compare the total dollars repaid, the annualised cash-flow cost, the repayment cadence, the payout and top-up rules, and the security or guarantee behind the deal. Separate upfront price terms from contingent fees so you know what applies on schedule and what only triggers later. Then keep the documents and the first repayment dates after settlement, because the next expensive decision is often a rushed refinance or top up made without a current payout figure. And before you sign, ask whether the lender belongs to AFCA, because that decides where a dispute can go.
Key takeaway: translate every offer into the same dollars, annualised cost and repayment schedule before you compare it.Frequently Asked Questions
On a five year term at 7.44 per cent a year on the reducing balance, a $50,000 business loan repays at around $1,000 a month, around $60,028 in total. Shorten the term to three years on the same rate and the repayment rises to around $1,554 a month while the total interest falls to around $5,942. Those figures are illustrative arithmetic on stated assumptions, not a quote, and the rate you are offered will depend on your file.
Banks and other deposit takers charged small businesses 7.44 per cent a year on new loans and 7.46 per cent on outstanding loans in July 2026, according to the RBA. Accredited online lenders that publish pricing started from 15.5 per cent APR when read on 21 September 2026, and most price per application rather than publishing at all. No official series measures short term non bank working capital lending, so neither figure is the rate on your file. See how short term business loans work.
On $50,000 repaid in 52 equal weekly instalments over twelve months, a factor of 1.20 costs $10,000. That is 20 per cent of the advance as a flat cost, and roughly 37 per cent a year as a nominal annual rate on the balance you actually hold. Change the term or the repayment frequency and the annual figure changes, so run the conversion on your own schedule. Illustrative arithmetic, not a quote.
Start with the net cash that actually reaches you after upfront fees, then list every scheduled repayment. Total dollar cost is all repayments plus separate upfront fees minus the amount advanced. For an annualised comparison, use the actual repayment cash flows to calculate a periodic internal rate of return and annualise it. A flat percentage alone does not adjust for how quickly the balance comes back to the lender.
Put both offers into the same frame: net cash received, total dollars repaid, payment amount and frequency, term, annualised cash-flow cost, early-payout and top-up treatment, and any security or personal guarantee. A lower total repayable can still mean a heavier weekly debit or a higher time-adjusted cost, so do not choose from the headline rate or factor alone.
Establishment or origination, drawdown, line or facility fees, dishonour, late and default fees are common examples on business lending. For credit provided wholly or predominantly for business purposes, the National Credit Code consumer-disclosure regime generally does not apply, but other laws still can. Under the unfair contract terms law, disclosed upfront price terms are treated differently from contingent fees such as late fees, which can be assessed under that law.
It depends on the pricing method and contract. On a reducing-balance rate, more frequent principal repayments can reduce the balance sooner and may reduce interest. On a fixed total, flat-fee or factor structure, more frequent debits do not automatically reduce the contracted total, so they can take cash from the business sooner without a saving unless the lender gives a payout or other discount. See the protections a business borrower has.
Not automatically. A fixed total, flat-fee or factor facility may give no rebate, a partial discount or a contract-specific early payout figure. A reducing-balance loan can also carry minimum-interest, break, exit or fixed-rate payout costs. Ask for a written payout in dollars before refinancing or paying early rather than assuming the account balance is the amount required to close the loan.
It depends on the lender and the contract. When a facility is increased or rewritten before the term ends, the new contract is priced on the new amount, so ask whether the unearned flat fee or factor cost on the original facility is rebated, discounted or carried into the new total, and ask for the answer in dollars before you accept.
The ATO says a business can claim the interest it pays on money borrowed within Australia to finance business operations or meet current business expenses. This guide does not cover how an establishment fee, a factor cost or a merchant cash advance fee is treated, so ask your accountant before you rely on a deduction for those. One comparison has changed: the ATO no longer allows a deduction for general interest charge incurred on or after 1 July 2025, which matters if the loan would replace an ATO debt.
Start with the lender or broker, in writing. If that does not resolve it, the Australian Financial Complaints Authority on 1800 931 678 can hear small business complaints about commercial lending where the business has fewer than 100 employees and the lender is a member. Lenders that only make commercial loans do not have to belong to AFCA, so ask before you sign, and get legal advice if yours is not a member. See working capital for a business under two years old.
No, not generally for credit used wholly or predominantly for business purposes. ASIC's consumer comparison-rate rules apply to advertised fixed-term credit for personal, domestic or household purposes. For a business-purpose facility, compare the net cash received, total repayable, repayment schedule, fees and early-payout terms on the same annualised basis. Some AFIA code members provide standardised pricing metrics voluntarily, but that is different from the statutory consumer comparison-rate regime. See how short term business loans work.
The cheapest way is almost always the most secured, most documented and longest dated facility you can qualify for, because price tracks risk and evidence. Unsecured, fast and lightly documented money is the most expensive version of the same $50,000. If credit history is the constraint rather than security, the pricing conversation is a different one, covered in business lending with bad credit.
The two that matter are a repayment schedule that outruns your collections, and using the facility to cover a structural shortfall rather than a timing gap. Borrowing does not fix an insolvent business, and if the money is going on wages, tax or suppliers every month, speak to the Small Business Debt Helpline on 1800 413 828 before you take on more. See what to do when business loan repayments get hard.
On most business lending the lender pays the broker an upfront commission at settlement and a trail while the loan runs, and the borrower pays nothing directly. Charging the client a fee is not standard practice, and where a broker does charge one it must be disclosed before you engage them, so ask who is paid and whether any of it is added to what you repay. See what to do when business loan repayments get hard.
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