What a bank bill business loan is, how BBSY plus a margin, line fees and rollovers set the cost, and when to stay on a term loan or refinance out.
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Bank Bill Business Loan · BBSY Pricing · Line Fees and Rollovers
Why does a bank offer an established business a loan whose rate resets every few months against a market benchmark, and when is that better than a standard term loan? This insight explains how a bill facility is priced, what the line fee and rollovers cost, what the bank checks, and what your options are if you stay, switch or refinance out.
Quick Answer
A bank bill business loan is a facility, usually from a major bank for established businesses, where the rate is a market benchmark plus a margin and resets at each rollover, with a line fee on the limit, rather than a standard variable rate set by the lender. It can suit a larger, steady business with strong reporting. If the bank's covenants, reviews or fees no longer fit, a standard term loan or a refinance through our business loans panel is usually the alternative.
Also called: commercial bill facility, bill facility, market rate business loan. A market rate loan is how some banks label a loan priced the same way, off the bank bill benchmark plus a margin, but without bills being drawn and rolled over.
What is a bank bill business loan?
A bank bill business loan is a facility where the business draws funds against a limit for a set period, pays a rate built from a bank bill benchmark plus a margin, and then rolls the drawing over into a new period at the new benchmark. The facility sits in place for an agreed term, often several years, but the rate inside it is reset at every rollover rather than moved at the bank's discretion.
Historically the business issued a bill of exchange that the bank accepted and discounted, which is where the name comes from. Today most bill facilities work the same way in substance without anyone handling paper: you choose a drawing period, the bank sets the rate for that period off the benchmark, and at the end you repay, roll over or change the amount drawn within the limit. A market rate loan is the same pricing idea with ordinary loan drawings instead of bills.
These facilities are offered chiefly by major banks to established businesses with larger borrowings, typically secured over commercial property or the business's assets, so they sit at the larger end of secured business lending. If you want the wider map of business finance types first, the business loans guide and our business loan definition cover them, and the business term loan decision guide covers the standard alternative in full.
How does a bill facility differ from a standard term loan?
A bill facility differs from a standard term loan mainly in how the rate is set and what you pay on money you have not drawn. On a standard term loan the lender sets its own variable rate, or a fixed rate, and you repay principal and interest on a schedule. On a bill facility the rate is a benchmark plus a margin, there is usually a line fee on the limit, and repayments can be interest only with principal reductions agreed separately.
| Question | Bank bill facility | Standard business term loan | Refinance to a non-bank term loan |
|---|---|---|---|
| How is the rate set? | A bank bill benchmark plus a customer margin, typically agreed in the facility letter. | The lender's own variable rate, or a fixed rate for a set period. | The lender's own rate for the risk, set by the lender rather than a published benchmark plus margin. |
| What moves the rate? | The benchmark at each rollover; the margin usually changes only at review or renegotiation. | The lender's rate decisions on variable loans; nothing during a fixed period. | Varies by lender and product; often fixed for the term or variable at the lender's discretion. |
| Are there fees on the limit? | Usually a line or activation fee on the whole limit, drawn or not. | Typically establishment and account fees; no line fee on most loans. | Typically establishment fees; varies by lender. |
| How are repayments made? | Often interest only, with principal reductions agreed with the bank. | Principal and interest on a set schedule is the usual pattern. | Principal and interest or interest only, varies by lender. |
| Who does it usually suit? | Established businesses with larger borrowings, strong financial reporting and property or asset security. | Most businesses that want predictable repayments and simple pricing. | Businesses whose bank facility was not renewed or whose covenants no longer fit. |
| What does leaving early cost? | Possible break costs on a fixed or hedged portion; varies by agreement. | Break costs on fixed loans; early repayment fees on some, varies by lender. | Depends on the new lender's terms and any exit cost on the old facility. |
The table above is indicative and varies by lender and by agreement, so read your own facility letter for the actual terms. The table below is the quick sort: which factors point to a bill facility, and which point to staying on a term loan.
| Factor | Points to a bill facility | Points to a term loan |
|---|---|---|
| Size of the borrowing | Larger, where a small margin difference matters | Smaller, where a line fee eats the margin saving |
| Profits and security | Steady profits, accountant-prepared statements, and commercial property or strong asset security | Profits that swing year to year |
| Reporting | Comfortable reporting to the bank every year, or more often | No appetite for covenants and annual reviews |
| Repayments | Wants to choose when to reduce principal | Wants repayments that stay the same every month |
| Day-to-day management | Someone watches rollovers and the benchmark | No one to watch rollovers and the benchmark |
How is a bank bill business loan priced?
A bank bill business loan is priced as a benchmark plus a margin: the bank bill swap bid rate (BBSY) for the drawing period you choose, plus a customer margin the bank sets for your risk. BBSY is derived from the market rate for bank bills, known as BBSW, so when short-term market rates move, the rate on your next rollover moves with them.
The Reserve Bank's May 2026 Bulletin on banks' funding costs and lending rates explains that variable-rate business loans are typically priced with reference to short-term interest rates such as the cash rate or BBSW, and at the time of writing it described new variable business rates falling through 2025 and rising during 2026 in line with those rates. Fixed rates follow swap rates instead, and fixed-rate lending remains a small share of business lending.
The rate resets at each rollover, so the benchmark part changes with the market while the margin usually stays as agreed until the bank reviews the facility. That is the main difference from a standard variable rate, which the lender can move whenever it chooses. For how lenders price business and property loans more generally, see our commercial property loan rates insight; we do not quote BBSY or margin figures here because both change and depend on the borrower.
What are line fees and rollovers on a bill facility?
A line fee is a charge for keeping the facility limit available, and a rollover is the point at which a drawing ends and is renewed for a new period at the new benchmark. Most bill facilities carry a line fee on the whole limit, drawn or not, so an unused part of the limit still costs money.
Rollover periods are chosen at each rollover, typically from about a month to a few months, depending on the bank. A shorter period tracks the market more closely; a longer one holds the rate steady for longer. At each rollover you can usually keep the same amount drawn, reduce it, or draw more up to the limit.
To work out the effective cost, add three things in words rather than looking at the margin alone: the benchmark for the period, the margin, and the line fee spread across the amount you actually have drawn. A low margin on a large limit you only half use can cost more than a higher rate on a loan sized to need. Our business loan calculator shows how repayments change with rate and term, and the worked repayment examples show the same arithmetic on standard loans.
What do banks look at before approving a bill facility?
Banks approve bill facilities on the strength of the business's financial statements, its ability to cover interest and debt, and the value of the security. What lenders actually look at first is whether profits cover the interest with room to spare, and only then the property.
- Financial statements. Typically two or more years of statements prepared by an accountant, plus current management accounts and tax returns.
- Interest cover and debt service. Measures such as interest cover and the debt service coverage ratio, which compare earnings with interest and total repayments.
- Security and loan to value. A maximum loan to value ratio on commercial property or other security, set by the bank and varies by lender and property type.
- Covenants and reporting. Financial covenants written into the facility, with obligations to send statements and compliance figures on time.
- Directors and guarantees. Guarantees from directors are common where the borrower is a company or trust.
Covenants are reported, not just signed. A business that cannot produce accurate figures on schedule can be in breach even while it is trading well, which is why banks look closely at who prepares the accounts. Our insight on what lenders check first on a business loan covers the broader file, and owners across industries will find related guides on the Business Owners Hub.
What happens with fixing, annual reviews and covenants on a bill facility?
A bill facility is reviewed by the bank, often every year, and part of it can be fixed through a separate interest rate hedge, while covenants are tested throughout. Each of these can change what the facility costs or whether it continues.
Fixing. Because a bill facility floats with the benchmark, some businesses fix part of it with an interest rate swap or a similar hedge arranged with the bank. The facility still floats, and the swap offsets the movement, which gives a fixed rate outcome on that portion. Unwinding a swap early can create break costs that move with the market in either direction. Whether to hedge, and how much, is a question for your bank and your accountant.
Annual review. At review the bank looks at your latest figures, the security and the covenants, and can reset the margin, ask for principal reductions, change conditions, or decline to renew at the end of the term.
Covenants. If a covenant is breached, the agreement usually gives the bank rights such as charging a higher margin, asking for more security or calling a review. How those situations are handled, and how to respond, is covered in our guide to covenant breaches and interest-only expiry.
What are your options when a bill facility is not renewed or no longer fits?
When a bill facility is not renewed or no longer fits, the main options are to renegotiate with the same bank, move to a standard loan with another bank, or refinance to a non-bank term loan. Which one is realistic depends on why the facility ended: a bank changing its appetite for an industry is a different conversation from a covenant breach.
Non-bank lenders still hold a small part of the system. According to the RBA Financial Stability Review, March 2026, non-bank lenders account for about 6 per cent of Australian financial system assets, and the RBA describes the sector as lending in areas where banks tend not to compete. For a business leaving a bank, that matters because a non-bank lender prices on its own assessment of the risk rather than a published benchmark plus a margin, often with simpler reporting and fewer covenants, usually at a higher rate. Our comparison of non-bank lenders and banks sets out the trade-off.
- Read the facility letter. Note the expiry date, any notice periods, and break costs on any hedged portion.
- Gather current figures. Latest statements, management accounts, and a schedule of the security.
- Start early. Refinancing takes time, and our guide to a business facility that is not renewed walks through the window.
- Compare the whole cost. Rate, fees, repayments and exit, not the headline rate alone.
If you want to see which lenders would look at your file before the bank's deadline, you can check eligibility in a few minutes.
A bank bill business loan is a facility priced as a benchmark plus a margin, where the rate resets at each rollover and a line fee applies to the whole limit, drawn or not. It can suit a larger, steady business with strong reporting and good security, because the pricing tracks the market and the business controls when to reduce principal. The trade-offs are covenants, annual reviews, hedging decisions and the cost of unused limit. When the facility stops fitting, the choice is between renegotiating, moving to a standard term loan, or refinancing to a non-bank lender, and each should be judged on its whole cost.
Key takeaway: compare the benchmark, margin and line fee together on the amount you actually draw, and start refinance talks well before the review date.Frequently Asked Questions
A bank bill is a short-term debt instrument that a bank accepts, and in business lending the term now usually describes a bill facility, where a business borrows against a limit at a bank bill benchmark plus a margin. Each drawing runs for a set period and is then rolled over at the new benchmark. Our business loan definition shows where bill facilities sit among other loan types.
A bank bill business loan interest rate is worked out by adding the bank's customer margin to the bank bill benchmark, BBSY, for the drawing period chosen. The benchmark changes at each rollover and the margin is usually fixed until review, and a line fee on the limit adds to the effective cost. A business loan calculator helps you test repayments at different rates.
A bank bill facility can fund a large business loan, and larger borrowings are where these facilities are most commonly offered, usually against commercial property or strong business security. How much a bank will lend depends on earnings, interest cover and loan to value limits, which vary by lender. Our guide on how to apply for a business loan covers what to prepare.
A line fee on a business loan is a charge for keeping a facility limit available, and on a bill facility it usually applies to the whole limit whether or not the money is drawn. It is charged on top of the interest on the drawn amount, so an oversized limit raises the effective cost. Most standard term loans do not carry a line fee.
A bank bill facility can be refinanced with a non-bank lender, usually into a term loan priced on the lender's own assessment rather than a benchmark plus a margin. Check the facility letter for notice periods and any break costs on a hedged portion before you move. Our guide to refinancing a business loan covers the process.
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