Hidden fees for business loans in australia
The fees that make an Australian business loan cost more than its advertised rate are the establishment fee, a minimum interest period, prepaid interest that is not refunded, line and management fees, extension fees, early repayment penalties and discharge fees. HomeSec charges no application fee, no extension fee and no early repayment penalty, and discloses every cost in writing before signing.
There are no hidden fees in Australian business lending. There are disclosed fees that borrowers do not think to ask about, which amounts to the same thing if you do not know the list.
Here is the list. Print it, and use it on every lender you speak to — including us.
The twelve
Establishment fee. Charged to set the loan up, sometimes flat and sometimes a percentage. Ask: flat or percentage, and is it payable if the loan does not settle?
Legal and disbursements. Preparing and registering the security documents. Ask: capped or open-ended, and whose solicitor?
Valuation fee. A sworn valuation by a registered valuer — several hundred to a few thousand dollars and several days. We do not require one, on any file.
Application or assessment fee. Charged to look at the file, sometimes non-refundable if you are declined. We do not charge one.
Minimum interest period. A floor on interest charged even if you repay in week two. Commonly three months, sometimes six. Ask: how many months minimum? We have none.
Prepaid interest. Interest deducted up front from the advance. Reasonable in itself — the question is what happens to the unused portion. Ask: is unused interest refunded on early repayment? Ours is.
Line or management fee. An ongoing monthly charge separate from interest. Ask: is there one, and is it inside the rate you just quoted me?
Extension fee. Charged to roll the loan past its stated term. We charge none.
Early repayment fee. A penalty for paying out early. We charge none.
Discharge or exit fee. Charged to release the security at the end. Ask: how much, and when is it disclosed?
Default interest. A higher rate applying after the term expires. Ask: what rate, and from exactly when?
Broker or introducer fee. Paid to whoever referred you, sometimes added to your loan balance. Ask: is a commission being added to what I owe?
Why the rate on its own tells you nothing
Take $200,000 for four months. Lender A quotes 0.77% per month; Lender B quotes 1.50%. On the rate alone that is not a close contest.
Now add the fees. Lender A charges a 2% establishment fee, a three-month minimum period and a $1,500 discharge fee. Lender B charges a flat $2,500 establishment fee and nothing else.
Do the arithmetic in dollars over four months and the gap narrows sharply, and on a shorter term it reverses — because a three-month minimum means a borrower finished in six weeks pays for three months anyway.
The comparison that matters is total dollars over the period you actually need the money. Everything else is marketing.
Why we do not publish a rate
Because we would be doing the same thing. Private lending is genuinely risk-priced per file — security type, LVR, position on title, quality of the exit, and how much documentation exists all move the number. Any single advertised figure is either our best-case file on a billboard, or a number that changes the moment you apply.
What you get instead is a real figure in writing, on a Letter of Offer, within about two business hours of the first phone call, before you have paid us anything or committed to anything. That is a price. A number on a homepage is not.
Reviewed by Jason Brockmuller, Joint Chief Executive