Business Loans – What Fees Apply?

CANSTAR reveals the typical fees you can expect to pay on a business loan or business overdraft facility.

There are three main types of fees and charges that are charged on business lending:

  1. Ongoing Fee: Charged for the administration of the loan or overdraft facility.
  2. Upfront Fee: Charged for establishing the loan or overdraft facility. This fee usually depends on the size of the loan.
  3. Interest Rate: Charged on the balance of the loan or overdraft facility.

As we talked about in a previous article, we can’t give you a dollar-for-dollar comparison of the interest rates charged on business loans, because lenders will often add a risk margin interest charge on top of their advertised interest rate. Margins can also be negative if you pose a lower risk to the lender, so that the risk margin decreases the overall interest rate you pay. But we can certainly take an in-depth look at the fees that lenders will charge you to open and maintain a loan or overdraft with them.

Compare Business Loan Fees

 

What fees to expect

Fees can make a big difference to the cost of your loan. And as you can see from the tables below, there can be a canyon’s divide between the cheapest and most expensive fees – so it pays to shop around!

For example, for a commercially secured overdraft with a low balance of $50,000, there is a gap of $730 between the least and most expensive ongoing fees in terms of the products that CANSTAR has researched.

Fees on Low Balance Overdrafts and Term Loans
  Ongoing Fee Upfront Fee
Profile Minimum Average Maximum Minimum Average Maximum
Commercially Secured Overdraft $120 $431 $850 $125 $579 $820
Residentially Secured Overdraft $0 $397 $850 $125 $579 $820
Commercially Secured Term Loan $0 $277 $480 $0 $1,043 $2,500
Residentially Secured Term Loan $0 $205 $480 $0 $1,023 $2,500
Source: www.canstar.com.au

Based on loan amount of $50,000 for overdrafts and $250,000 for term loans.

The gap between the least and most expensive fees is even more pronounced when you’re dealing with a higher balance overdraft or term loan. For example, a commercially secured overdraft with a high balance of $125,000 could see a $1,380 in the ongoing fees on offer.

Fees on High Balance Overdrafts and Term Loans
  Ongoing Fee Upfront Fee
Profile Minimum Average Maximum Minimum Average Maximum
Commercially Secured Overdraft $120 $737 $1,500 $313 $725 $1,250
Residentially Secured Overdraft $0 $672 $1,500 $313 $709 $1,250
Commercially Secured Term Loan $0 $227 $480 $0 $1,855 $5,000
Residentially Secured Term Loan $0 $205 $480 $0 $1,778 $5,000
Source: www.canstar.com.au

Based on loan amount of $125,000 for overdrafts and $500,000 for term loans.

Of course, it’s worth mentioning that fees are just a small part of the loan. The biggest thing a consumer should be concerned with is trying to get a competitive interest rate.\

Canstar’s Hot Tip: Look for a flat fee

Some institution’s fees can be astonishingly more expensive, because they are charged as a percentage of the loan amount you borrow rather than being a flat fee. With a flat fee, your ongoing fee is not going to get more expensive if your overdraft grows.

For finance that grows along with your business – without the fees out-growing your budget – compare business loans and business overdrafts with Canstar.

 

Compare Business Loans with CANSTAR

Similar Topics:

Share this article