Mr's short answer
The true cost is the total dollars you'll pay over the loan, not one headline number. That includes interest, establishment and legal fees, any valuation, ongoing account fees, and early repayment or default charges. Every business loan is priced on its own circumstances, such as security, credit, term and purpose, so ask for a full dollar breakdown before you sign.
Key points
- Compare loans by total dollars repaid, not by a single advertised figure.
- Fees can include establishment, legal, valuation, account and early repayment charges.
- Pricing depends on security, credit history, term, amount and purpose.
- Mr doesn't publish 'from' rates because almost nobody gets them.
“What’s your rate?” is the question Mr gets asked first and answers last. Not because it’s a secret, but because a single headline number tells you surprisingly little about what a business loan will cost your business. Here’s how to look at cost the way a careful owner — or a good accountant — would.
Why isn’t the interest rate the whole story?
Two loans with the same headline rate can cost very different amounts once you add the fees, the term and the way repayments are scheduled. And a lower advertised rate can come with costs that don’t show up until you try to leave early. The only fair comparison is total dollars out of your account from the day the loan starts to the day it’s cleared.
What goes into the cost of a business loan?
| Cost | What it is | When you pay it |
|---|---|---|
| Interest | The lender’s charge for the money | Over the term, or sometimes capitalised on short-term loans |
| Establishment / application fee | Setting up the loan | Usually at settlement, often deducted from the advance |
| Legal fees | Lender’s (and your own) solicitor for documents and security | At settlement |
| Valuation | Independent value of property offered as security | Before approval |
| Account or line fee | Ongoing cost of keeping a facility open | Monthly or annually |
| Early repayment / break costs | Charges if you repay before the agreed date | If you exit early |
| Default and late fees | Charges if repayments are missed | Only if things go wrong |
Not every loan has every item. The point is to ask about each one, in dollars, before you commit.
Why do two businesses get different prices for the same amount?
Because lenders price risk, and risk differs. The biggest levers are:
- Security. Property generally reduces a lender’s risk. First mortgages are usually viewed more favourably than second mortgages.
- Credit history. Clean recent history helps; recent defaults cost.
- Term. Short-term bridging finance and longer amortising loans are priced differently.
- Amount and purpose. A clear, sensible purpose with a solid exit is easier to price well.
- Paperwork. Up-to-date financials and tax affairs reduce uncertainty.
That’s why Mr doesn’t publish rate cards. The person with the perfect file gets the “from” rate; everyone else gets disappointed. You deserve the sharpest price available for your situation — and that can only be worked out with your details.
How do I compare two offers fairly?
Use this checklist and write the answers down side by side:
- Total repaid over the full term, if everything goes to plan.
- Upfront costs, including what’s deducted from the advance.
- What you actually receive in your account on settlement day.
- Cost to repay early at three, six and twelve months.
- Repayment frequency and whether it suits your cash flow.
- Security required and any personal guarantees.
- Time to funds — a cheaper loan that arrives after the IRD deadline isn’t cheaper.
If your loan has a short-term exit planned, item 4 matters a lot. Read how long should my business loan be? for how term and cost interact.
When you’re ready to see real numbers for your situation, tell us what you need and a specialist will put the full costs in front of you before anything is signed.
Is it worth paying more to get it sorted?
Sometimes, yes. Mr has seen owners lose a supplier discount, a contract, or a lot of goodwill with IRD while waiting for the cheapest possible deal. Questions worth asking yourself:
- What does it cost the business if this isn’t funded by the date I need it?
- Will this loan let me clear something more expensive, such as overdue tax that’s gathering penalties?
- Can I refinance to something cheaper once the urgent part is done?
The goal is the best value for what the money achieves, not simply the lowest number.
How do I keep the cost down?
- Borrow what you need, not the maximum on offer.
- Have documents ready so nothing stalls.
- Fix what you can first — file overdue returns, set up an instalment arrangement, tidy the bank account.
- Plan your exit and stick to it.
- Ask about early repayment before you sign.
If you’re juggling several debts already, combining them into one loan can sometimes reduce the total, though not always.
An illustrative comparison in dollars
These figures are invented and deliberately round, to show the method rather than any real pricing.
A Dunedin retailer is weighing two offers to borrow $100,000 for twelve months to fund a shop refit.
| Offer A | Offer B | |
|---|---|---|
| Headline pricing | Slightly higher | Slightly lower |
| Establishment fee | Low | Higher |
| Legal and valuation | Included | Charged separately |
| Monthly account fee | None | Yes |
| Cost to repay at month 6 | Small fixed fee | Interest for the full term is payable |
On the headline number, Offer B looks better. But the owner expects a lump-sum insurance payout in month six and plans to repay early. Once the early repayment terms, the separate legal and valuation costs and the monthly fee are added up in dollars, Offer A works out cheaper for this owner’s plan — even with a higher headline.
The lesson: build your comparison around how you actually expect to use the loan, not around a perfect-world scenario.
Questions to ask any lender about cost
Take this list to every conversation:
- What is the total I’ll repay if the loan runs to term?
- What comes out of the advance on day one, and what lands in my account?
- Are legal and valuation costs included, estimated or extra?
- What does it cost to repay at three, six and nine months?
- Are there ongoing account or line fees?
- What fees apply if a repayment is late or missed?
- Is anything capitalised (added to the balance) rather than paid as I go?
A lender who answers all seven clearly, in dollars, is a lender worth considering. One who won’t is telling you something too.
Get a real number, not a “from” number
Tell us the amount, the purpose and your security position, and we’ll talk real costs for your situation. There’s no credit check to ask, your enquiry isn’t fired off to a list of lenders, and a real person explains every fee in plain English.
Please answer the form accurately — especially amount, property and credit history — so the figures we discuss are ones you can rely on. Ask Mr what your loan would cost.
Frequently asked questions
Why don't you publish interest rates?
Because every business loan is priced on the borrower's situation — the security, the credit history, the term, the amount and the purpose. A 'from' rate is the price for a near-perfect file, which most people don't have. We'd rather give you a real figure for your case.
What fees should I ask about?
Ask about establishment or application fees, the lender's legal costs, valuation fees on property-secured loans, ongoing account or line fees, early repayment or break costs, and default or late fees. Ask for them in dollars.
Is the cheapest loan always the best?
Not necessarily. A slightly dearer loan that can be approved in time, fits your repayment pattern and lets you exit early without heavy fees can be better value than a cheaper one that arrives too late or ties you in.
Can I claim loan costs against tax?
Interest and many borrowing costs on genuine business loans are generally deductible for income tax, but the rules have detail. Check with your accountant for your situation.