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Private loans are individually priced. Two term sheets for the same deal can be laid out in completely different ways, which makes a like for like comparison harder than it should be.
Put every offer in one table
| Line | Offer A | Offer B |
|---|---|---|
| Loan amount | $800,000 | $800,000 |
| Rate | 0.99% a month | 1.15% a month |
| Establishment fee | 2.5% | 1.5% |
| Lender legal fees | $6,500 | $4,000 |
| Valuation | $3,300 | $3,300 |
| Broker or arrangement fee | 1% | none |
| Interest for 6 months | $47,520 | $55,200 |
| Total cost for 6 months | $85,320 | $74,500 |
| Minimum interest period | 3 months | 1 month |
| Higher rate on default | 4% a month | 2.5% a month |
Offer A has the lower rate and costs about $10,800 more over six months. Repaid after two months, the gap widens because of its three month minimum interest period. These are illustrative figures. Rates actually available are on the rates and fees page.
The checklist
Cash
- Net advance after all fees and any prepaid interest.
- Who pays the valuer and when.
Cost
- Rate, and whether it is fixed for the term.
- Establishment, legal, broker, line and administration fees.
- Whether interest is serviced, prepaid or capitalised. See capitalised and prepaid interest.
Term
- Length, and whether it matches your exit with room to spare.
- Minimum interest period and any early repayment fee.
- Extension terms, in the contract and not just spoken.
Default
- The higher rate, what triggers it and whether there is a grace period. See default interest rates.
Security
- Which properties, what ranking, and whether a general security agreement or additional guarantees are required.
- How partial releases work if one property sells.
Certainty
- Is this the lender, or someone who will look for a lender?
- What conditions remain before a formal offer?
- How quickly can they settle, with evidence of having done it?
Cheapest is not always best
A slightly dearer loan that settles in time is worth more than a cheap one that misses your deadline. A lender that will extend on reasonable terms is worth more than one that goes straight to the higher rate. Weigh reliability alongside price.
Get advice
Have your solicitor read the loan documents, and your accountant check the after-tax cost. The how it works page sets out the steps from enquiry to settlement.
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Get matched with a funderFAQ
Why is there no comparison rate?
Comparison rates are a consumer credit requirement. They are not used in business lending, so you have to do the sum yourself.
Should I pay an upfront fee to get an offer?
A valuation fee paid to a valuer, and a modest commitment fee after a formal offer, are normal. Large fees before any offer are a warning sign.
Is an indicative offer binding?
No. It is subject to valuation, searches and due diligence. Ask what could change the terms, and whether the rate is fixed once the formal offer is issued.