Quick answer
To compare business loan offers properly, line them up on the same measures: the amount you will actually receive, the total you will repay including all fees, the repayment amount and frequency, the term, early payout terms, flexibility such as top-ups and redraws, security and guarantee requirements, and default terms. The cheapest offer in dollars is usually best, but only if its repayments fit your cash flow.
Key points
- Compare the amount received, not just the amount borrowed.
- Total repayable including fees is the clearest cost measure.
- Repayment frequency must suit your income pattern.
- Read guarantee, security and default terms too.
When you have more than one offer in front of you, the temptation is to choose the one with the biggest amount or the smallest weekly repayment. Both can mislead. Offers are structured differently, fees are charged in different ways and terms vary. The only reliable way to choose is to put every offer on the same measures, side by side. This guide gives you the checklist.
Measure 1: the amount you actually receive
Some fees are deducted from the loan before it is paid to you. A $100,000 loan with a $3,000 establishment fee deducted means $97,000 in your account. Always compare offers on the amount that will land, because that is what you have to use.
Measure 2: the total you will repay
Add up every repayment over the full term, plus any fees not included in repayments. This is the total cost of the loan to your business. Subtract the amount received and you have the true cost in dollars. Our guide to the true cost of business finance explains this in detail.
Measure 3: repayment amount and frequency
Two offers with the same total cost can have very different effects on cash flow. Daily debits suit businesses paid daily; weekly or monthly debits suit businesses paid less often. Put each offer through the repayment estimator to see daily, weekly, fortnightly and monthly equivalents, and test them against your quietest weeks. See daily versus weekly repayments.
Measure 4: term
Longer terms reduce each repayment but usually increase the total cost. Shorter terms do the reverse. The right term matches how long the money will be working for you. See matching the loan term to its purpose.
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Measure 5: early payout
If you might repay early, for example when a big invoice lands, early payout terms matter. Some loans reduce remaining charges if repaid early; others require the full agreed total. A loan that looks slightly dearer but rewards early repayment may be cheaper in practice. See paying out a business loan early.
Measure 6: flexibility
Can you top up the loan once part is repaid? Is there a redraw? Can repayments be paused in an emergency? Can you change the repayment day? Flexibility has value, especially for seasonal businesses or those with lumpy income.
Measure 7: security and guarantees
Who must guarantee? Is the guarantee limited or unlimited, joint and several, specific to this loan or covering all moneys? Is property security required? These terms determine what is at stake if things go wrong. See personal guarantees explained.
Measure 8: default and dishonour terms
What counts as a default? What fees apply if a repayment bounces? How quickly does the lender act? Are there conditions, such as maintaining a minimum balance or not taking other finance, that could trigger a default? Read these carefully; they matter most when things are tight.
Measure 9: speed and certainty
If you have a deadline, the offer that can actually fund in time may be worth more than a cheaper one that cannot. Ask each lender what is still needed and when funds can be released.
A side-by-side worksheet
For each offer, write down:
- Amount received.
- Total repayable including all fees.
- True cost in dollars.
- Repayment amount and frequency.
- Term.
- Early payout terms.
- Flexibility features.
- Guarantee and security requirements.
- Key default terms and fees.
- Time to funding.
Seeing these in columns usually makes the decision obvious.
Red flags in an offer
- Pressure to sign immediately without time to read.
- Fees that are not clearly stated in dollars.
- Upfront fees payable before funds are released.
- Unusual conditions that seem one-sided.
- Vague answers about payout or default terms.
Small businesses have protection against unfair terms in standard form contracts. If something seems unfair, ask about it, and get advice if you are unsure.
Comparing different products
Sometimes the offers are not all loans: one is a line of credit, another invoice finance, another a merchant cash advance. Compare them on expected usage in dollars over the same period. Our guides on line of credit versus business loan and invoice finance versus line of credit help.
How many offers is enough?
Two or three well-matched options are usually plenty. Collecting offers by applying formally to many lenders can leave a trail of credit enquiries that makes lenders cautious. An enquiry-first approach lets you see realistic options before any formal application.
Asking lenders the right questions
When an offer arrives, reply with a short list of questions and ask for written answers: the total repayable, every fee in dollars, the repayment schedule, the payout process and any conditions. Lenders that respond clearly and quickly are usually easier to work with for the life of the loan. If answers are vague or slow, treat it as a signal.
Keep a record of every offer
Save each offer, along with any answers you received, in one folder. If you need to refer back during the loan, or compare with a refinance offer later, you will have everything in one place. It also helps your accountant understand the facility when preparing financial statements or advising on tax treatment.
When to walk away from all of them
Occasionally, laying offers side by side shows that none of them really works. Every repayment is too heavy for your quiet months, or the true cost outweighs what the funding will achieve. That is a useful result. It may mean the amount is too high, the term is wrong, the purpose would be better served by a different product, or the business would be better off fixing timing or margin first. Saying no to a poor fit is always better than saying yes to a facility that strains the business for months.
An illustrative comparison
An illustrative printing business receives three offers for about $60k. Offer one has the lowest weekly repayment but runs for three years with a large establishment fee deducted upfront. Offer two runs for eighteen months with weekly repayments, a modest fee and reduced charges for early payout. Offer three is a merchant advance with a fixed total cost. Laid out side by side, offer two has the lowest true cost on the business’s expected early repayment and fits its weekly income. It is not the smallest repayment, but it is the best deal.
Get offers you can compare
We present options in dollars, side by side, with the terms explained. There is no credit check to enquire, your details are not sent out to a long list of lenders, and a real person walks you through each option. Accurate answers on the form help us bring you offers worth comparing. Apply now.
Frequently asked questions
What is the most important number in a loan offer?
The total amount repayable, including every fee, compared with the amount you actually receive. That gives the true cost in dollars.
Should I always take the cheapest offer?
Usually, if it fits your cash flow and its terms are reasonable. A slightly more expensive offer with better flexibility or payout terms can sometimes cost less in practice.
How many offers should I compare?
Two or three well-matched offers are usually enough. Applying to many lenders can leave multiple credit enquiries on your file.
What contract terms should I check?
Guarantees, security, default events, dishonour fees, early payout terms, and any restrictions on taking other finance.
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