Total cost of finance, explained

If you remember one thing about comparing business funding, make it this: work out the total cost of finance in dollars. It cuts through every way a quote can be presented.

The formula

Total cost of finance = total repaid + any other fees - cash received

• Total repaid: every scheduled repayment, plus any balloon or end-of-term payment.
• Other fees: anything charged outside the repayments, such as discharge or line fees.
• Cash received: the amount that actually lands in your account after any upfront deductions.

Worked example (illustrative)

A lender approves $80,000. A $2,000 establishment fee is deducted, so $78,000 lands in your account. Repayments are $1,700 a week for 56 weeks, totalling $95,200. There is a $300 discharge fee at the end.

• Total repaid plus fees: $95,500.
• Cash received: $78,000.
• Total cost of finance: $17,500.
• Cost per dollar received: about $0.22.

Want a person to look at your numbers? The 60-second enquiry runs no credit check, and the person who reads it is the person who calls you back.

Why it beats headline figures

Headline figures can leave out fees, assume a different term or describe the cost in a way that is hard to compare. Total cost in dollars includes everything. And because business loans generally skip the standardised cost disclosures consumer loans carry, it is often the only consistent measure available.

Using cost per dollar

Divide the total cost by the cash received. It lets you compare a $40,000 six-month loan with a $150,000 two-year loan on equal terms. The repayment calculator works it out for you.

Is it worth it?

Total cost only means something when set against what the funding achieves:

Use of funds	Compare total cost with
Supplier early payment discount	The discount in dollars
New contract	The contract’s margin
ATO debt	GIC and the cost of firmer ATO action
Equipment	The income or savings the equipment produces
Covering a gap	The cost of missing wages, penalties or lost sales

If the funding earns or saves more than it costs, it is likely worth it. If it does not, think again. Our guide on when not to borrow covers the warning signs.

Special cases

• Prepaid interest reduces cash received, which increases total cost per dollar. See prepaid vs capitalised interest.
• Capitalised interest increases the total repaid at the end.
• Lines of credit: estimate a year’s cost at your expected average balance, including any fee on the limit.

Ask for the numbers

Every lender should be able to tell you the total amount repayable and all fees in writing. Our guide to loan fees to ask about lists what to check.

Read next

• How to compare business loan quotes: How to compare business loan quotes when lenders present costs differently: total repayable, cost per dollar, fees, flexibility and early repayment terms.
• Business loan fees to ask about: The business loan fees that are easy to miss: establishment, line, account, dishonour, default, early repayment and discharge fees, and how to compare them.
• Prepaid vs capitalised interest: How prepaid and capitalised interest work on property-secured business loans, what each does to the amount you receive and repay, and which suits when.
• When not to borrow: Borrowing is not always the answer. The warning signs that a business loan would make things worse, and the alternatives worth considering first.

Key terms, in plain English

• General interest charge: the ATO’s interest on overdue tax, set quarterly and compounding daily; not deductible when incurred from 1 July 2025.
• Total cost of finance: the dollar gap between the cash that reaches your account and everything you hand back over the life of the loan, fees included.
• Capitalised interest: interest that rolls into the balance owing rather than leaving your account each month.
• Prepaid interest: interest for an agreed period settled at the start of a loan, usually out of the advance, leaving nothing to pay for that period.

Five things to confirm with any lender

• What will this cost in total, not just per week?
• Are there establishment, line or exit fees?
• Can the term be extended if a sale or refinance is delayed?
• Which assets or properties are being used as security?
• How quickly can the facility be closed if I no longer need it?

Where your accountant fits in

Your accountant knows your numbers better than anyone, so involve them early. They can confirm figures for the enquiry, flag tax effects of different structures, and tell you whether the timing of a loan suits your BAS and tax cycle. A lender’s job is to assess whether funding fits; your accountant’s job is to make sure the business is set up to carry it well. The two work best together.

In a nutshell

• Total cost = total repaid + fees - cash received
• Captures interest and every fee in one figure
• Cost per dollar compares loans of different sizes
• Weigh it against what the funding achieves

How we work through it with you

The process is built to avoid wasted time. The enquiry asks only what matters. The first call gathers what is missing. Statements are shared securely online, documents are signed electronically and any property security is prepared in parallel. Straightforward files can be approved within the hour, and funds can land within 24 hours once everything is signed. More complex files take a little longer, and you will be told why. Where a step is waiting on someone else, such as a co-owner’s signature, we will tell you so it can be chased.

When borrowing helps, and when it does not

Ask yourself where the repayment will come from. A customer payment, the next peak season, a property sale or steady trading are all real sources. Hope is not. If you can point to the money that will clear the loan, and roughly when, funding is likely to help. If you cannot, talk to your accountant about the underlying numbers first.

Before you send the enquiry

A little preparation makes the first conversation far more useful, and it means the person who calls you can talk about options rather than chasing basic details:

• Your ABN and the legal name of the business.
• Online banking access, so recent statements can be shared through a secure read-only link.
• A rough figure for monthly turnover and the amount you need.
• A list of current loans and repayments, including any ATO payment plan.
• If property is involved, the address and roughly what is owed on it.

Getting the enquiry right

The enquiry asks for the amount, the purpose, how long you have traded, your monthly revenue, your credit history, your state and whether you own real estate. Each answer steers your enquiry towards the right option. Accurate answers let the first call move straight to solutions. Rounded-up turnover or a credit history that turns out to be different from the form means starting again, which costs everyone time.

Get a straight answer

To see what is available for your business, complete the 60-second enquiry. It is free, there is no credit check and it goes to one team, not a lead marketplace. Please be precise with the amount, turnover and credit history. Those answers shape everything that follows, and getting them right is the single best way to get a fast, useful answer.