A loan offer is where the conversation becomes a contract. In non-bank and private lending, offers can arrive quickly, which is the point, but speed is no reason to skim. Here’s how to read one properly, section by section, in the order that matters.
1. The basics: is this what you asked for?
- Borrower: the correct legal entity (company, trust, individual)?
- Amount: gross loan, and the net amount you’ll actually receive after fees are deducted.
- Purpose: correctly described?
- Term: when does it end, and is that consistent with your exit plan?
2. The total cost
Don’t focus on the interest rate alone. Build a total:
| Cost item | Where to find it | Question to ask |
|---|---|---|
| Interest | Pricing section | How is it calculated and charged? Monthly, capitalised or prepaid? |
| Establishment or application fee | Fees schedule | Deducted from the advance or paid separately? |
| Broker or arrangement fee | Fees schedule / disclosure | Who is paid what, and when? |
| Legal fees | Fees schedule | Both yours and the lender’s? |
| Valuation | Conditions | Who orders it and pays? |
| Line or facility fees | Fees schedule | Charged on the limit or on drawn amounts? |
| Early repayment | Repayment section | Is there a minimum interest period or break fee? |
| Default charges | Default section | What changes if you’re late? |
| Discharge fee | Fees schedule | Cost to remove the security when repaid? |
Then calculate the total cost for the period you realistically expect to hold the loan, not just the best case. We never publish rates because every loan is priced on the individual situation, but any lender should make the full cost clear in writing.
3. Security: what are you putting up?
- Which property or assets are secured? Just one property, or everything?
- Ranking: first or second mortgage? Is consent from an existing lender needed?
- PPSR registrations: is a general security agreement over all business assets included?
- Third-party security: is anyone else’s property involved?
See business loan security explained.
4. Guarantees: who else is on the hook?
- Who is giving a personal guarantee?
- Is it limited to an amount, or unlimited?
- Does it cover only this loan, or all present and future debts to the lender? The difference is significant.
5. Default: what counts, and what happens?
Default clauses are where offers differ most. Look for:
- Payment default: how many days late before it’s a default?
- Non-payment defaults: things like insolvency events, new security given without consent, material adverse change, breach of undertakings, or tax arrears.
- Consequences: default interest or fees, the lender’s right to demand immediate repayment, and enforcement steps.
- Remedy periods: do you get notice and time to fix a problem?
6. Repayments and early repayment
- Repayment structure: interest-only, principal and interest, or a lump sum at the end?
- Dates and method: direct debit, frequency.
- Early repayment: can you repay early without penalty? Any minimum interest period? This matters if your exit is a refinance.
7. Conditions precedent
Things that must happen before funds are released: valuation, legal sign-off, consents, insurance, identity verification, discharge of other security. Each is a potential delay. Get started on them straight away.
8. Undertakings
Promises you make for the life of the loan, such as keeping property insured, providing information, not giving other security, and keeping tax current. Make sure you can realistically keep them.
A short example of reading the total cost
Example scenario (illustrative only): Two property-secured offers look similar on the headline. One deducts establishment and legal fees from the advance and has no early repayment cost; the other charges fees separately and includes a minimum interest period. If the owner expects to refinance to a bank within a few months, the minimum interest period could make the second offer dearer overall, even if its headline pricing looks sharper. The only way to know is to model both over the realistic holding period.
Red flags
- Pressure to sign before seeing full documents or getting legal advice.
- Requests for upfront payments before approval.
- Costs that appear in the documents but weren’t mentioned in the conversation.
- Vague or missing early repayment terms.
- An offer much larger than you asked for “because you qualify”.
Questions to ask the lender
- What’s the total cost if I hold this loan for its full term? For half?
- What exactly would count as a default?
- What does it cost to repay early, and when?
- What security are you registering, and where?
- What happens at maturity if my refinance is delayed?
Where we fit
We arrange property-secured business loans from $20,000 to $1m, unsecured loans and lines of credit. We’ll walk you through any offer line by line, and we expect you to review it with your lawyer before signing.