If a mate who’d worked in lending for twenty years sat down with you and your loan offer, this is the list they’d go through — probably with a coffee and a highlighter. None of it needs a finance degree. All of it can save you from an expensive surprise.
1. What’s the total you’ll repay?
Not the monthly repayment. Not the headline rate. The total: every dollar that will leave your account between now and the day the loan is finished, including interest and all fees.
Ask the lender to put that number in writing. If they can’t or won’t, that tells you something. Comparing offers on total cost — alongside how long you’ll have the money — cuts through almost every numbers game in lending. Our guide to the true cost of borrowing explains how.
2. Does the repayment schedule match your cash flow?
A loan can be affordable in total and still hurt if the repayments land at the wrong time. Check:
- How often repayments come out — daily, weekly, fortnightly or monthly.
- Which day — and whether that’s before or after your customers usually pay.
- Whether it’s interest-only for a period and then steps up.
- Whether there’s a lump sum (a “balloon” or full repayment) due at the end.
A cafe with daily takings can handle daily repayments. A builder paid monthly on progress claims probably can’t.
3. Can you repay early — and what does it cost?
Plans change. You might sell an asset, land a big job or refinance to a bank. Find out:
- whether early repayment is allowed at all;
- whether there’s a fee, a minimum interest period or a break cost;
- whether partial early repayments reduce the total or just shorten the term.
4. What happens if you’re late?
Read the default clause slowly. It usually covers:
- default interest or late fees added to missed payments;
- what counts as a “default” — sometimes it’s more than a missed payment (for example, a change in your business or a new debt elsewhere);
- how quickly the lender can demand the whole loan back;
- what enforcement steps they can take, including against any property security.
The default clause is the part you hope never to read again. That’s exactly why it’s worth reading properly now.
5. What security are you giving?
Know precisely what the lender can rely on if things go wrong:
- A mortgage over property — which property, and is it first or second ranking?
- A general security agreement (GSA) — which can give the lender security over all the business’s present and future personal property. It’s usually registered on the PPSR.
- Specific asset security — for example, over a vehicle or machine.
If the security is a family member’s property, they need to understand this as clearly as you do.
6. Who is guaranteeing it?
For company borrowers, lenders often ask directors — and sometimes spouses or other shareholders — to sign personal guarantees. Check whether the guarantee is limited to a set amount or unlimited, and whether it covers only this loan or “all obligations”, present and future. Our personal guarantees guide explains the difference in plain English.
7. What fees are involved, and when are they paid?
List every fee: establishment, legal, valuation, broker, administration, monthly account fees, variation fees, discharge fees. Then check when each is payable. Fees deducted from the loan amount mean you receive less than you borrow — make sure the net amount still covers what you need.
A fee demanded upfront before you’ve even been approved is a classic warning sign. See our list of red flags in loan offers.
8. Are there conditions or promises you’re making?
Some loans include covenants — ongoing promises such as providing financial statements by a deadline, keeping insurance in place, not taking on other debt without consent, or maintaining certain financial ratios. Breaking a covenant can be a default even if every repayment is on time. Make sure you can live with each one.
9. What’s your exit plan?
Every loan needs a way out. For a short to medium term loan that might be:
- repaying from business cash flow over the term;
- selling an asset;
- refinancing to a longer-term lender once your financials are up to date.
Write your exit plan down in a sentence. Then write what you’ll do if it takes twice as long. If you can’t answer the second part, the loan may be too big or too short. Our guide on planning your exit from a short-term loan helps.
10. Have you read it without anyone watching?
This one sounds silly, but it matters most. Take the documents home, or at least away from the person selling them to you, and read them in a quiet moment. Write down every question. A good lender — and a good broker — will happily answer them all.
If you’re signing as a guarantor or offering property as security, get independent legal advice. Lenders frequently require it, and it’s there to protect you.
A quick checklist to print
| Check | Tick when done |
|---|---|
| I know the total amount I’ll repay | ☐ |
| Repayments suit when my money comes in | ☐ |
| I understand early repayment terms | ☐ |
| I’ve read the default clause | ☐ |
| I know exactly what security I’m giving | ☐ |
| I understand any guarantee I’m signing | ☐ |
| I’ve listed every fee and when it’s due | ☐ |
| I can meet every condition or covenant | ☐ |
| I have an exit plan and a back-up | ☐ |
| I’ve read it calmly, and had advice where needed | ☐ |
Where LendFriend fits
We explain offers in plain English before you commit — including the parts people usually skim. Every loan is priced on your individual circumstances, and we’ll find the sharpest option available for yours from our lending panel. If something in an offer doesn’t sit right, we’ll say so.
And if you do need funding…
That's where we come in. Tell us what's going on and we'll match you with a lender from our panel that fits — and tell you honestly if borrowing isn't the right move.
Quick questions
Should I get a lawyer to review a business loan?
For any loan secured on property or involving a personal guarantee, yes. Guarantors and supporting parties are commonly required to get independent legal advice anyway, and a lawyer can flag clauses you might skim past.
How long should I take to review a loan offer?
Long enough to read every page and ask questions. Even with a tight deadline, give yourself at least a quiet hour. A reputable lender will give you the time and a full copy of the documents.