Smart ways to approach business loan fees and charges

What Business Loan Fees Actually Cost

Business loan fees typically include establishment fees, ongoing account-keeping charges, and exit costs. For medical professionals looking to expand a practice or purchase equipment, these charges can add several thousand dollars to the total cost of borrowing beyond the interest rate alone.

Most lenders charge an establishment fee to cover the cost of assessing and setting up your facility. This can range from around $500 to $2,000 depending on the loan amount and structure. Some lenders waive this fee entirely as part of their offering, while others may roll it into the loan amount rather than requiring upfront payment.

Consider a GP looking to fit out a new consulting room with diagnostic equipment. The loan amount might be $80,000 over five years. If the establishment fee is $1,500 and it's added to the loan balance, you're paying interest on that fee across the full term. At typical commercial rates, that $1,500 fee becomes closer to $1,900 in total cost by the time the loan is repaid.

Ongoing account-keeping fees sit between $10 and $30 per month for most business term loans. Over a five-year loan, that's $600 to $1,800 in additional costs. These fees cover the administrative work of maintaining your account, processing repayments, and providing statements. Not all lenders charge them, so it's worth asking whether they apply before you commit.

Secured Versus Unsecured Business Finance

Secured loans generally carry lower interest rates and fewer ongoing charges because the lender holds collateral. Unsecured business finance tends to have higher rates and may include additional risk-based fees, particularly if your business credit score sits below the lender's preferred range.

For medical professionals, collateral might include the equipment being purchased, commercial property, or even residential property if the loan is structured as a hybrid facility. A physiotherapist buying $120,000 worth of clinical equipment could secure the loan against that equipment itself. The lender registers a charge over the assets, which reduces their risk and often results in a rate that's one to two percentage points lower than an unsecured option.

Unsecured options don't require collateral but compensate with higher pricing. A dental practice seeking $50,000 in working capital to cover a gap between billing and payment from private health insurers might use an unsecured facility. The establishment fee might be higher, and there's often a monthly service fee on top of the interest rate. The trade-off is speed and simplicity, which can matter when cash flow is tight.

Early Repayment and Exit Fees

Exit fees apply when you repay a loan before the agreed term ends. These are more common on fixed interest rate facilities, where the lender has locked in a funding cost and expects to earn interest over the full period.

If you've taken a three-year fixed rate loan to fund the purchase of ultrasound equipment and decide to refinance after 18 months, the lender may charge an early termination fee. This fee is designed to cover the lender's cost of breaking their own fixed rate funding arrangement. The calculation varies by lender, but it's usually tied to the difference between the rate you're paying and the current market rate, multiplied by the remaining loan balance and time.

Variable interest rate loans typically don't carry the same level of exit cost. Some have no exit fee at all, while others charge a flat fee in the range of $300 to $700 if you repay early. The difference in exit costs is one reason why variable rate loans with flexible repayment options suit medical professionals who expect irregular income, such as specialists with consulting arrangements or practice owners preparing for a sale.

Drawdown and Valuation Charges

Progressive drawdown facilities are common when you're purchasing equipment in stages or funding a fitout over several months. Each time you draw down funds, some lenders charge a drawdown fee, typically $100 to $300 per draw.

A radiologist setting up a new imaging centre might draw funds in three stages: initial lease fitout, installation of MRI equipment, and final furnishings. If the lender charges $200 per drawdown, that's $600 in fees on top of the establishment cost. Some lenders cap the number of free drawdowns and charge only after that limit, while others include unlimited drawdowns as part of the facility.

Valuation fees apply when the loan is secured against property. If you're using your practice premises as security for a business expansion loan, the lender will require a current valuation. Expect to pay $300 to $800 depending on the property type and location. This cost is usually paid upfront and sits outside the loan amount, though some brokers can negotiate for the lender to cover it as part of the approval.

Line of Credit and Overdraft Fees

A business line of credit or business overdraft operates differently to a term loan. You're approved for a limit, and you pay interest only on the amount you draw down. These facilities usually carry higher ongoing fees because of the flexibility they offer.

Monthly service fees for a line of credit can range from $20 to $50, and some lenders also charge a non-utilisation fee if you don't draw down a certain percentage of your limit each month. This fee is designed to discourage businesses from holding unused credit lines, which still carry a cost for the lender.

For a busy practice managing irregular cash flow, a revolving line of credit can cover unexpected expenses like urgent equipment repairs or temporary staffing gaps. A GP practice with seasonal patient numbers might draw $30,000 in January to cover holiday-period gaps, repay it by March, then draw again in winter when flu season increases overheads. The monthly service fee remains constant whether the facility is fully drawn or sitting idle, so it's worth calculating whether the flexibility justifies the cost.

Comparison Rate and True Cost

Comparison rates are designed to reflect the true cost of a loan by combining the interest rate and most standard fees into a single percentage. They're useful for comparing offers side by side, but they don't capture every fee, particularly those tied to how you use the facility.

A lender might advertise a rate that looks lower than a competitor's, but the comparison rate reveals a higher cost once establishment fees and monthly charges are included. For medical professionals who typically have strong business financial statements and stable cash flow, it's worth pushing for fee waivers or discounts rather than accepting the advertised structure.

In our experience, lenders often have discretion to reduce or waive establishment fees for well-qualified borrowers, particularly when the loan amount is above $100,000 or when the borrower is refinancing from another lender. It's not always advertised, but it's worth asking.

Fees on Invoice Financing and Trade Finance

Invoice financing allows you to access funds against unpaid invoices, which can help cover working capital shortfalls while waiting for payment from insurers or bulk-billing arrangements. These facilities typically charge a discount fee, which is a percentage of each invoice value, rather than a traditional interest rate.

The discount fee usually sits between 1.5% and 4% of the invoice value, depending on the creditworthiness of the payer and how long the invoice is outstanding. If you're factoring $50,000 worth of invoices at a 2.5% fee, you're paying $1,250 for that cash advance. Some providers also charge an application fee and a monthly account fee on top of the discount rate.

Trade finance works similarly but is structured around the purchase of goods rather than the sale of services. It's less common in medical practice unless you're operating a pharmacy or importing equipment directly, but the fee structure follows a similar model.

Call one of our team or book an appointment at a time that works for you. We'll walk you through the fee structures across different lenders and help you identify which charges you can avoid and which ones are worth paying for the flexibility or features you need.

Frequently Asked Questions