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Business Loan Fees and Business Loan Rates

business loan fees

Business loan rates and business loan fees can be confusing. Many options are available with different interest rates. In addition, varying fees and charges apply across the spectrum of business finance. To clear up any confusion you might have about business banking, we will take a closer look at business loan fees and rates.

Business loan fees

Business loan fees and business loan rates are two components that determine the cost of business finance. Here are some common ones you might come across. 

Amendment fees: These are charged when you want to make a change to a loan agreement, such as extending or decreasing the term of a loan and changing the corresponding payments.

Annual fees: Credit card companies usually charge an annual fee for the use of business credit cards. The amount of the fee will depend on the type of card and its features. For example, rewards cards that offer many benefits will charge a higher annual fee than a no-frills card that doesn’t offer many extras.  

Application, establishment fee, origination fee or upfront fee: This is what you pay for the initial set-up of some loans.

Early repayment fee: When you make additional payments and pay off a loan early, the lender doesn’t make as much from interest payments. As a result, some business loans include early repayment fees when additional payments are made.

Default fee: An amount of money that is charged when you fail to make a loan payment on time.

Discharge fee: Also known as a termination or settlement fee, it’s paid when you pay off the balance on a loan or refinance with another lender.

Document fee: This is the fee for creating the documents related to your loan.

Electronic transaction fee: This is sometimes charged when you make an electronic transaction.

Exit fee: This is charged if you end you fixed-term business loan early.

Overlimit fee: This fee is charged when you go over your limit on a credit card.

Late payment fee: A fee charged for any late payments on a business loan or credit card.

Line fee: Lenders charge this fee to keep a line of credit open.

Monthly fee, facility or account-keeping fee: A fee charged during the term of the loan. These are common charges on business overdrafts and lines of credit.

Ongoing fee: A fee that is charged regularly throughout the life of the loan. Could be a monthly fee as defined above.  

Risk assessment fee: Sometimes charged in addition to an account establishment fee, such as with a merchant cash advance.

Withdrawal fee: A fee charged when using a credit card to withdraw cash from an ATM.

These are the main business loan fees associated with a range of lending products. Of course, not all of these fees will apply to a single loan and some are specific to certain products such as credit cards. In all cases, you’ll want to check the terms and conditions carefully for any hidden fees.

Types of business loans and their corresponding fees

Type of Business Loan Business Loan Fees
Business Overdraft
  • Establishment fee
  • Account-keeping fee
  • Line fee
Business Credit Card
  • Annual fee
  • Late payment fee
  • Overlimit fee
Equipment Finance
  • Establishment fee
  • Document fee
Invoice Finance
  • Establishment fee
  • Line fee
  • Monthly fee
Business Line of Credit
  • Establishment fee
  • Account-keeping fee
  • Line fee
Low-Doc, No-Doc Loan
  • Application fee
  • Discharge fee
  • Documentation fee
  • Monthly fee
  • Settlement fee
  • Valuation fee
Merchant Cash Advance
  • Establishment
  • Account-keeping fee
  • Risk assessment fee
Online Unsecured Loan
  • Establishment fee1
Business Term Loan
  • Establishment fee
  • Monthly fee
Vehicle Finance
  • Establishment fee
  • Document fee

Business loan interest rates

In addition to any business loan fees, interest is charged on the loan principal which is the amount of the loan. For example, if you borrow $100,000, this amount is known as the principal of the loan. The percentage you pay in addition is the interest amount which can come in several forms. These are typically variable or fixed interest rates:

Variable interest rate: This rate can change throughout the term of your loan, so your repayments can change. If you are on a tight business budget, make sure you can pay the higher repayments with a variable rate if the interest rates change.

Fixed interest rate: This interest rate will stay the same for the term of the loan, so your repayments will not change throughout the term. Business loans with fixed rates are good if you want the stability of knowing what your payments will be.

Another factor to keep in mind is compounding. This is when interest is added on top of the interest charged. Interest can be compounded daily, weekly, fortnightly and monthly. The shorter the compounding interval – for example, weekly instead of monthly – the more interest you will pay.

Here’s a simple example. If you have a fixed interest rate of 10% on a $100,000 loan with a term of 10 years and monthly compounding and payments, you will pay $158,580.88 over the term of the loan.

Repeating the example above, if you have a loan amount of $100,000 for a term of 10 years at 10%, and the interest is compounded daily, the total principal and interest repaid is $158,849.48 over ten years. In the first example the effective annual interest rate is 10.00%, while in the second, with daily compounding, it’s 10.041%.

In addition, you can add fees into the equation to get what’s called the ‘comparison rate’ or sometimes it’s called APR (annualised percentage rate). If we add a $1,000 establishment fee to the first example above, the interest increases from 10.00% to 10.24%. Typically, the comparison rate (which includes compounding and fees) is one-quarter to one-half a point higher than the interest rate quoted. This shows us that compounding and fees can make a big difference to the actual interest rate when they are added to a loan.

Even more confusing, there are ‘simple interest rates’ that are not so simple. Check out APR vs Simple Interest Rate: Why It’s Not So Simple to learn more.

Making a choice based on business loan rates and fees

When you have the information – including the business loan fees and interest rates – you are in a position to make an informed decision when you compare business loans. Remember to read the fine print to uncover any hidden fees and determine the true interest rate.

Learn more in How to Compare Business Loans. For approximate ranges of interest rates on various loan products, see What’s the Business Loan Interest Rate?

You can also use our business loan calculator to get an estimate of principal and interest repayments on Moula business loans.


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