Top 10 Fees and Charges on Business Loans to Know

When you apply for a business loan, the interest rate is only part of what you'll pay. Application fees, settlement costs, and ongoing charges can add thousands to the total cost of your finance, and they vary considerably between lenders.

Application and Establishment Fees You'll Encounter

Most lenders charge an upfront application fee to process your loan, typically ranging from $500 to $2,500 depending on the loan amount and lender. Some banks waive this fee during promotional periods, while others bundle it into the settlement costs. You'll also encounter an establishment fee, which covers the administrative work of setting up your facility once approved. For a secured business loan backed by property or equipment, establishment fees usually sit between 0.5% and 1% of the loan amount. On a $300,000 facility, that's $1,500 to $3,000 before you've drawn a single dollar.

Consider a Morley retailer securing finance to fit out a new shopfront in Morley Galleria. With a $200,000 loan, an establishment fee of 0.75% adds $1,500 to the upfront costs. If the business also pays a $1,200 application fee, that's $2,700 in fees before settlement. These costs matter because they affect how much working capital remains available after the loan settles.

Valuation and Legal Fees for Secured Facilities

If you're using property or equipment as collateral, the lender will require an independent valuation. Property valuations for commercial premises in Morley typically cost between $800 and $2,000, depending on the asset type and complexity. Equipment valuations can range from $500 for straightforward plant and machinery to over $3,000 for specialised assets. Legal fees cover the preparation and registration of security documents. For a standard commercial property mortgage, expect $1,500 to $3,500 in legal costs, which include title searches, mortgage documentation, and registration with Landgate.

These fees are non-negotiable when securing finance against an asset, but you can sometimes negotiate who pays them. Some lenders will capitalise valuation and legal costs into the loan amount, which reduces your upfront cash requirement but increases the total amount you're borrowing and paying interest on.

Monthly Account Keeping and Service Fees

Many business term loans and lines of credit include a monthly account keeping fee, usually between $10 and $50 per month. Over a five-year loan term, that's $600 to $3,000 in cumulative fees. Some lenders waive this fee if you maintain a linked transaction account or meet minimum monthly turnover thresholds. Service fees can also apply for features like redraw facilities, progressive drawdown on construction or fitout loans, or access to online account management.

For a Morley cafe using a business line of credit to manage seasonal cash flow fluctuations, a $25 monthly service fee might seem small, but it adds $300 annually to the cost of maintaining the facility, even in months when the business isn't drawing on the credit.

Early Repayment and Break Costs on Fixed Rates

Fixed interest rate business loans offer repayment certainty, but they come with restrictions. If you repay the loan early or make lump sum payments beyond the agreed schedule, most lenders charge an early repayment fee or break cost. Break costs compensate the lender for the interest income they lose when you exit the loan before the fixed term ends. The calculation is complex and depends on the difference between your fixed rate and the current wholesale rate at the time of repayment. On a $500,000 fixed rate loan with two years remaining, break costs can easily exceed $15,000 if rates have fallen significantly since you locked in.

Variable interest rate facilities usually allow unlimited additional repayments without penalty, making them more suitable for businesses with fluctuating cash flow or plans to sell assets and repay debt ahead of schedule.

Discharge and Exit Fees When You Finish the Loan

When you repay the loan in full, either at the end of the term or through refinancing, the lender charges a discharge fee to remove the security and close the facility. Discharge fees typically range from $300 to $800, depending on the lender and the number of securities registered. If your business loan is secured against multiple properties or a combination of property and equipment, each security may attract a separate discharge fee.

Some lenders also charge an exit fee, which is distinct from the discharge cost and can range from $500 to $2,000. This fee is less common on modern commercial lending products but still appears in some loan contracts, particularly on older facilities or non-bank lenders.

Late Payment and Default Fees That Compound Quickly

Missing a scheduled repayment triggers a late payment fee, usually between $35 and $100 per missed payment. If the missed payment causes your account to fall into arrears, some lenders charge an additional default administration fee, which can be several hundred dollars. Default fees compound quickly because they're charged each month the account remains overdue, and they're added to your outstanding balance, meaning you pay interest on the fees themselves.

In our experience, businesses experiencing temporary cash flow disruptions benefit from proactive communication with the lender. Most banks and commercial lenders will offer a short-term repayment variation or hardship arrangement that avoids default fees entirely, but you need to initiate that conversation before the payment is missed.

Ongoing Fees for Lines of Credit and Overdrafts

A business line of credit or business overdraft provides flexible access to working capital, but flexibility comes with additional fees. Most lenders charge a line fee, calculated as a percentage of the approved limit, typically 0.5% to 1.5% per annum. On a $100,000 line of credit, that's $500 to $1,500 annually, regardless of how much you draw. You'll also pay interest only on the amount you've drawn, calculated daily and charged monthly at a variable interest rate.

For a Morley trade business using a $150,000 revolving line of credit to fund supplier purchases and invoice financing gaps, a 1% line fee costs $1,500 each year even if the business only draws $50,000 on average. That fee structure makes lines of credit expensive for businesses that don't regularly utilise the full facility.

Documentation and Variation Fees During the Loan Term

If you need to change the loan structure, extend the term, or adjust the security during the loan, most lenders charge a variation fee. Common variations include switching from interest-only to principal and interest repayments, adding or removing a guarantor, or substituting one asset for another as collateral. Variation fees typically range from $300 to $1,500 depending on the complexity of the change and the lender's policies.

Documentation fees can also apply if you request duplicate statements, audit certificates, or certified copies of your loan agreement. While these fees are small individually, usually $20 to $100 per document, they add up over the life of the loan if you're regularly providing documentation to accountants, auditors, or other stakeholders.

Annual Review and Renewal Fees for Flexible Facilities

Some commercial lenders, particularly for business overdrafts or revolving lines of credit, conduct an annual review of your facility. This review assesses your business financial statements, cash flow, and credit profile to determine whether the facility should be renewed, reduced, or cancelled. Lenders may charge an annual review fee, typically $200 to $800, to cover the cost of this assessment. If the review results in a requirement for updated valuations or financial reporting, those costs are usually separate and additional.

For businesses with seasonal revenue or significant year-on-year growth, the annual review can also trigger a request for updated business plans or cashflow forecasts, which may require accountant or advisor input at additional cost.

Comparing Total Cost Across Lenders and Loan Structures

When comparing business loan options from banks and lenders across Australia, focus on the comparison rate and total fees over the life of the facility, not just the advertised interest rate. A loan with a lower rate but higher upfront and ongoing fees can cost more overall than a slightly higher rate with minimal fees. This is particularly relevant for short-term facilities or loans you plan to repay within two to three years, where upfront establishment fees have less time to be absorbed.

For a Morley business comparing a $400,000 loan across three lenders, one might offer a 6.5% variable interest rate with $3,000 in upfront fees and no monthly account fees, while another offers 6.2% with $8,000 in establishment costs and a $30 monthly fee. Over five years, the second option could cost more despite the lower rate. A broker can model these scenarios using your specific loan amount, term, and repayment pattern to identify which structure delivers the lowest total cost. You can explore business loans options tailored to your circumstances, or if you're also considering property finance, a commercial loan might suit your needs.

Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structures from multiple lenders, explain which charges apply to your situation, and ensure you're comparing like with like before committing to a facility. Whether you're in Morley or elsewhere in Perth, we'll help you understand the full cost of your business finance and structure it to suit your cash flow and growth plans.

Frequently Asked Questions