How to choose between two business loan offers

Getting two offers is a good position to be in. It’s also where many owners make their most expensive mistake: picking the one that looks cheaper. Offers are presented differently, fees sit in different places, terms differ, and repayment schedules vary. This guide gives you a fair, repeatable test so you can judge two offers on the same scale.

Why are business loan offers so hard to compare?

Because no two are laid out the same way. One might quote a weekly repayment over 18 months with an establishment fee deducted from the advance. The other might quote a monthly repayment over three years with a monthly account fee and a discharge fee at the end. Both can be perfectly legitimate, and the one with the friendlier-looking repayment might cost thousands more.

Headline pricing doesn’t settle it either. It’s quoted in different ways, it leaves out fees, and it says nothing about term. That’s why we judge offers on dollars.

Step 1: What cash will you actually receive?

Start with the money that lands in your account, or goes to whoever you’re paying.

• Take the loan amount.
• Subtract any fees deducted from the advance (establishment, documentation, broker or valuation fees taken at settlement).

If one offer lends you the full amount and the other deducts a fee first, you’re not comparing like with like. You’ll repay the full loan amount on both, but receive less cash from one.

Step 2: What will you repay in total?

Next, add up everything that will leave your account over the life of the loan:

1. All scheduled repayments. If the offer gives a repayment amount and a number of repayments, multiply them. Weekly repayments over 18 months is roughly 78 repayments; check the contract for the exact count.
2. Upfront fees you pay separately.
3. Ongoing fees: monthly account, line or service fees, multiplied by the number of months.
4. Exit fees: discharge or early payout fees you’re likely to pay.
5. Any balloon or lump sum at the end.

Then: total cost of finance = total paid − amount borrowed. That’s the true price of the loan in dollars.

Our free total cost comparer does this for two offers at once, along with cost per month and cost per $1,000 borrowed.

Step 3: How does each one fit your cash flow?

The cheaper offer isn’t always the right one. Now look at how each would behave inside your business:

Question	Why it matters
How often are repayments taken?	Daily or weekly repayments can suit businesses paid daily, but squeeze those paid monthly or on long terms.
What’s the repayment in your worst month?	Test against your slowest month, not your average.
Can you repay early, and what does it save?	Some loans charge most of the remaining cost even if you pay out early.
Is there a balloon?	Lower repayments now, a lump sum later.
What security and guarantees are needed?	Property security and personal guarantees change what’s at stake.

If you’re unsure whether a longer or shorter term suits, our verdict on short-term versus long-term loans walks through the trade-off. Want a second opinion on the offers you hold? A specialist can look at them with you, with no credit check to ask.

A worked example: two offers for the same need

Illustrative only. These figures are made up to show the method; they don’t represent any lender’s pricing.

A joinery business needs $100,000 for new machinery and working capital. It receives two offers.

	Offer A	Offer B
Loan amount	$100,000	$100,000
Fee deducted from advance	$2,500	$0
Separate upfront fee	$0	$990
Monthly account fee	$0	$40
Term	24 months	36 months
Total scheduled repayments	$128,000	$131,500
Exit fee	$0	$0

Running the numbers:

• Offer A: cash received $97,500. Total paid $128,000 + $2,500 = $130,500. Total cost of finance $30,500. Cost per month about $1,271. Average monthly outgoing about $5,333.
• Offer B: cash received $100,000. Total paid $131,500 + $990 + ($40 × 36 = $1,440) = $133,930. Total cost of finance $33,930. Cost per month about $943. Average monthly outgoing about $3,693.

Verdict: Offer A costs about $3,430 less overall. Offer B is much lighter on monthly cash flow and delivers the full $100,000. If the business’s slowest months can comfortably carry Offer A’s repayment, A is the better deal. If not, B’s breathing room may be worth the extra dollars. The point is that the owner now knows exactly what that breathing room costs.

What clauses should you read before you sign?

The numbers are half the story. The contract is the other half. Before signing, read and understand:

• Default provisions. What counts as default, and what happens: fees, higher pricing, the whole balance becoming due?
• Early payout. Exactly how the payout figure is calculated.
• Security. What’s being mortgaged or charged, including any general security over all business assets.
• Guarantees. Who’s guaranteeing, for how much, and whether the guarantee is limited.
• Variations. Whether the lender can change fees or terms during the loan.
• Reviews. For lines of credit, how and when the limit can be reduced.

Why this matters more for business loans: ASIC’s information on disputes about commercial loans notes that commercial loans receive the lowest level of legal protection compared with consumer loans, and that courts expect parties to protect their own interests. AFCA can consider complaints from small businesses with fewer than 100 employees. ASIC also explains how unfair contract term protections can apply to small business contracts. None of that replaces reading the document before you sign it.

How do you avoid ending up with the wrong two offers?

The best comparison starts before the offers arrive. A few principles:

• Get offers for the right structure. Comparing two unsecured loans is pointless if asset finance or a line of credit fits your need better. The Best Biz Loan Finder ranks structures for your situation first.
• Don’t apply everywhere. Each formal application can leave an enquiry on your credit file. Business.gov.au’s guide to applying recommends comparing products and checking a lender’s legitimacy on ASIC’s register before you apply.
• Ask for the total repayable in writing. Any reputable lender can provide it.
• Know the lender type. Our verdict on bank versus non-bank lenders explains where each tends to fit.

What’s the fair verdict process, in short?

1. Cash received, both offers.
2. Total paid, both offers, every fee included.
3. Total cost of finance and cost per month.
4. Repayment in your worst month.
5. Early payout, balloon, security, guarantees, default terms.
6. Choose the cheaper offer unless a term in the other would genuinely protect your cash flow, and know what that protection costs.

What if the offers are for different amounts or terms?

Use cost per $1,000 borrowed to put them on equal footing, then check whether the extra amount in the larger offer is something you actually need. Borrowing more than the job requires just because it’s offered adds cost without benefit. For different terms, compare the total cost first and then decide whether the lower repayment of the longer loan is worth the difference.

Want an offer worth comparing?

If you’re still at the stage of finding out what’s possible, start with one well-matched conversation rather than a scattergun of applications. Tell us what you need in about a minute. There’s no credit check when you first enquire, and your details go to one specialist rather than a crowd of lenders.

If you already hold two offers and want a fair second opinion, say so in the form. Give us the real amounts, terms and fees from each, and we’ll help you read them side by side, including what the structure, term and total cost would look like if we found a better fit.