Small business loan rates in Australia: what sets the price and how to compare offers
How Australian lenders price small business loans in 2026, from the RBA cash rate to margins, security, fees and term, with worked cost examples.
A small business loan rate in Australia is the lender's cost of funds plus a margin for the risk it sees in your business, the security you offer, the loan term and its own costs. Loans secured by property are usually priced well below unsecured loans, and fees can move the real cost as much as the rate. The way to compare offers is to convert each one into total dollars paid for the same amount and term. There is no regulated comparison rate for most business lending, so you have to do that sum yourself.
This page is the overview for the Rates, Costs and 2026 Rules section. Every rate below is an illustrative example, not a current offer from any lender.
Where a business loan rate comes from
Think of the quoted rate as a stack of components:
| Component | What drives it | Can you influence it? |
|---|---|---|
| Base or reference rate | The RBA cash rate, bank bill swap rates (BBSW) for commercial loans, the lender's funding mix | No |
| Credit risk margin | Trading history, profitability, industry, credit files of the business and directors | Partly, through records and track record |
| Security margin | Property mortgage, general security agreement, equipment, or nothing | Yes, by what you offer |
| Term and structure | Longer terms, interest-only periods and fixed rates carry more risk or hedging cost | Yes |
| Size and relationship | Small loans cost more to administer per dollar; existing banking relationships can help | Sometimes |
| Distribution cost | Broker commissions and marketing are built into pricing | Indirectly |
The Reserve Bank of Australia sets the cash rate target. According to the RBA, it rose by 0.25 percentage points to 4.60% from 30 September 2026, after increases earlier in 2026. Variable business loan rates usually move with the cash rate or with the lender's own business reference rate, though not always by the same amount or on the same day. Check the RBA cash rate page for the current figure before relying on it.
The main loan types and how they are usually priced
Each type of finance has its own pricing logic. The finance types comparison has the full table; in short:
- Property-secured term loans and lines of credit are usually the cheapest per dollar, because the lender can recover from a registered mortgage. See secured vs unsecured business loans.
- Loans secured by a general security agreement (GSA) over business assets sit in the middle. The PPSR guide explains what a GSA covers.
- Unsecured loans from banks and online lenders carry higher rates or percentage fees and usually a director guarantee.
- Overdrafts add a limit or line fee to the interest on what you draw. See overdraft vs line of credit.
- Invoice finance is priced as a discount charge plus a service fee. See factoring vs discounting.
- Equipment finance is secured over the asset and often priced between secured and unsecured. See chattel mortgage vs lease.
- Short-term loans and merchant cash advances are often quoted as a factor rate rather than an annual rate; the factor rate guide converts them.
Worked example: what a few percentage points cost
Take a $200,000 loan over five years with monthly principal and interest repayments (illustrative figures):
| Scenario | Rate | Monthly repayment | Total interest over 5 years |
|---|---|---|---|
| Property-secured | 8.5% | about $4,103 | about $46,200 |
| Unsecured, guarantee only | 13.5% | about $4,602 | about $76,100 |
The difference is about $500 a month and roughly $29,900 over the term. For a business with tight margins, that is often the difference between a loan that cash flow comfortably supports and one that does not. You can repeat the calculation with the repayment calculator.
Now add fees. If the unsecured lender charges a 3% establishment fee ($6,000) deducted at settlement, you receive $194,000 but repay as if you borrowed $200,000. The net proceeds calculator shows that gap, and the fees guide lists the other charges to ask about.
Why the comparison rate usually does not help
For home loans and personal loans, lenders must show a comparison rate under the National Credit Code. That Code, part of the National Consumer Credit Protection Act 2009, applies to credit used wholly or predominantly for personal, domestic or household purposes, or to buy, renovate or refinance residential investment property. Credit for business purposes is generally outside it, so most business loan advertising has no standardised comparison rate.
What does apply to business lending is explained in the rules guide: the ASIC Act's protections against misleading or unconscionable conduct and unfair contract terms, and the Banking Code of Practice for banks that subscribe to it.
How to compare offers in five steps
- Fix the scenario. Same amount, same term, same repayment frequency.
- List every fee. Establishment, valuation, legal, PPSR, monthly account, annual review, line fee, early repayment and break costs.
- Find the cash you actually receive. Deduct any fees taken out of the advance.
- Calculate total cost. Repayments added up, minus cash received, plus fees paid separately.
- Check the conditions. Security, guarantees, covenants and review clauses can matter more than a small rate difference.
The three-offer worked comparison runs these steps on illustrative quotes.
Other factors that change your price
- Industry. Lenders have appetite lists; construction, hospitality and some start-up sectors often face tighter terms.
- Trading history. Many lenders want at least one to two years of trading for standard terms. See start-up finance options.
- Tax position. An ATO debt not on a payment plan is a common red flag. See loan declined: what next.
- Fixed or variable. Fixed rates include the lender's hedging cost and can bring break costs. See fixed vs variable.
- Government-backed programs. Some agencies offer finance for exporters, farmers or clean energy projects. See government-backed finance.
When to get professional advice
Talk to your accountant before borrowing if the loan changes your structure, involves a trust or related-party lending, or is secured over your home. A solicitor should review guarantees and security documents. If you already have arrears, a free financial counsellor through the Small Business Debt Helpline is a good first call.
Frequently asked questions
Do business loan rates follow the RBA cash rate?
Usually, for variable loans, but not automatically. Lenders reprice their business reference rates when their funding costs change, and they may move by a different amount. Fixed-rate loans do not change during the fixed period.
Is a low-doc business loan more expensive?
Often, because the lender relies on less information. The gap varies by lender and security. See low-doc business loans.
Is a broker's quote the same as going direct?
Not necessarily. Brokers are paid commissions by lenders, and for pure business credit they are not subject to the consumer best interests duty that applies to home loan brokers. Ask how they are paid and which lenders they compared.
Should I choose the lowest rate?
Choose the lowest total cost that comes with conditions you can live with. A cheap secured loan may put your home at risk; a dearer unsecured one may not.
Sources
- Reserve Bank of Australia — cash rate target and decision dates
- ASIC — rules on misleading conduct, unfair contract terms and credit licensing
- business.gov.au — government guidance on business finance and grants
- Australian Banking Association — Banking Code of Practice — protections for small business bank customers
- Federal Register of Legislation — National Consumer Credit Protection Act 2009 and ASIC Act 2001
