Quick answer
The total cost of a business loan is every dollar you pay above the amount borrowed: establishment and other fixed fees, interest or time-based charges for the months you hold it, and any exit or discharge costs. For short-term loans it's the only fair way to compare offers, because terms, fees and early payout rules vary so much that a headline figure can't capture them.
Key points
- Total cost = fixed fees + time-based cost for the months you hold the loan + exit costs.
- Calculate it for your likely exit month, not just the full term.
- Headline figures ignore fees, minimum terms and payout rules — dollars don't.
- Ask every lender for the same five numbers in writing so the comparison is fair.
- Part 1
- Fixed, non-refundable fees
- Part 2
- Time-based cost per month held
- Part 3
- Exit and discharge costs
- Part 4
- Your realistic exit month
Why does total dollar cost matter more than a rate?
A percentage describes the price of money over a year. Short-term loans rarely last a year, often come with fees that aren’t in the headline figure, and treat early repayment in very different ways. So the percentage leaves out most of what you actually pay.
Dollars don’t. If you know that Loan A takes $X out of your business and Loan B takes $Y, you know which is cheaper for you. That’s why we talk about total cost of finance in dollars throughout this site, and why we don’t publish rates: every loan is priced on the borrower’s circumstances, and what matters is the dollar figure on your own quote.
What goes into the total cost?
Four parts, every time.
1. Fixed, non-refundable fees. Establishment, application, legal, valuation, documentation, brokerage if any. You pay these whether you keep the loan for a week or the whole term.
2. Time-based cost. Interest, or a fee that grows with each month you hold the money. This is the part early repayment can reduce — if the contract allows it.
3. Exit costs. Discharge fees, early repayment fees, and anything charged when the loan ends.
4. Your realistic holding period. Not a cost itself, but the multiplier for part 2. The total cost of a 12-month loan you repay at month five is very different from its full-term figure.
Put simply:
Total cost = fixed fees + (time-based cost per month × months held) + exit costs
Where interest is calculated on a reducing balance, the monthly figure changes as you repay, so ask the lender for the actual dollar amount rather than doing the maths yourself.
How do you ask a lender for the right numbers?
Send every lender the same written request:
| Ask for | Why |
|---|---|
| Total dollars payable if run to full term | Baseline comparison |
| List of fixed fees, with dollar amounts | These don’t shrink if you finish early |
| Payout figure at months 3, 6 and 9 (or relevant points) | Shows what early exit really costs |
| Any minimum interest period or early repayment fee | Explains why payout figures might not fall |
| Extension cost if more time is needed | Prices your plan B |
If a lender won’t put these in writing, that’s worth noting. business.gov.au’s guidance on applying for a loan encourages comparing lenders rather than accepting the first offer, and these five numbers make comparison possible.
Want quotes that come with these numbers laid out? Start with a 60-second enquiry — nothing touches your credit file.
Worked example: why the exit month changes the answer
Illustrative figures only — not a quote.
Two quotes for the same amount over 12 months:
| Quote A | Quote B | |
|---|---|---|
| Fixed fees | $2,000 | $6,000 |
| Time-based cost, full 12 months | $24,000 | $18,000 |
| Early payout rule | Time-based cost accrues daily | Time-based cost prepaid, no refund |
| Total if held 12 months | $26,000 | $24,000 |
| Total if repaid at month 6 | $14,000 | $24,000 |
At full term, B is cheaper by $2,000. If you exit at month six, A is cheaper by $10,000. Neither lender has done anything unusual — the difference is entirely in structure. This is why “which is cheaper?” always has a follow-up question: repaid when?
The short vs long term comparator runs this calculation for your own quotes and draws the cost of each option month by month.
What about the cost of not borrowing?
Total cost is half the picture. The other half is what the money does. If a short-term loan lets you pay a tax bill on time and avoid ongoing interest charges, fund stock that sells at a healthy margin, or take on a contract you’d otherwise have to turn down, the cost should be weighed against that return.
Be honest about both sides. If the return is uncertain and the cost is certain, the loan needs a very clear exit. Our page on when short-term is the wrong tool covers the cases where borrowing doesn’t add up.
How does tax affect the real cost?
The ATO lists interest on money borrowed to produce assessable income, and bank fees, among deductible operating expenses. That can reduce the after-tax cost, but the treatment of individual fees depends on your circumstances. Our guide on whether business loan interest is tax deductible covers the basics; your accountant can apply it to you.
A one-page total cost worksheet
Use this for each quote. Fill in the dollars; leave percentages out entirely.
| Line | Quote A | Quote B |
|---|---|---|
| Amount approved | ||
| Less fees deducted at settlement | ||
| Net funds received | ||
| Fixed fees (all, including capitalised) | ||
| Time-based cost to month ___ (your likely exit) | ||
| Early repayment charge at that month | ||
| Discharge / exit costs | ||
| Total cost at likely exit | ||
| Total cost at full term | ||
| Extension cost, if needed |
Two quotes filled in side by side will tell you more than any headline figure. If a lender can’t help you complete a line, ask them to.
Get a quote you can actually compare
Tell us what you need and a lending specialist will set out the total cost in dollars, the fixed fees and the payout at the points you’re likely to finish. There’s no credit check to start the conversation, and your details aren’t passed along to other lenders. Accurate amounts, timing and security details on the form mean the numbers you get back are the ones that apply to you.
Frequently asked questions
What is the total cost of finance?
It's the full dollar amount you pay on top of the money you borrowed: fees, interest and any charges to exit or discharge the loan. Comparing total cost shows which option actually takes less money out of your business.
Why not just compare interest rates?
Because short-term loans differ in fees, minimum terms and early payout rules. Two loans with similar headline pricing can cost very different dollar amounts once fees and payout terms are included, especially if you repay early.
Should I include the establishment fee if it's added to the loan?
Yes. A fee capitalised into the loan still costs you money — and you may pay interest on it too. Include it in total cost.
What if I don't know when I'll repay?
Calculate total cost at a few likely exit points — for example months 3, 6 and the full term. The comparator on this site does this automatically and shows where two quotes cross.
Is the total cost tax deductible?
The ATO lists interest on money borrowed to produce assessable income and bank fees among deductible business expenses. How the rules apply to each fee depends on your circumstances, so check with your accountant.