Quick answer
When business loan fees are deducted from the advance, you receive less than the headline amount but repay the full amount. A $100k loan with $4,000 of fees taken off pays out $96,000. Compare offers by net advance (cash in hand), total repaid, and cost of finance per $1,000 you actually receive, not the loan amount on the front page.
Key points
- Net advance is the cash that lands in your account: the loan amount minus any fees the lender takes off first.
- Fees can be deducted from the advance or added to the balance. Same fee, different cash in hand.
- Cost per $1,000 received is the fairest yardstick, because it divides total cost by the money you actually get to use.
- A lower total repayment doesn't always mean the cheaper loan, as the example below shows.
- Work out the loan amount you need to borrow to land the cash you need, before you apply.
Two lenders both offer you $100k. One deposits $96,000 and the other deposits $100,000. Both call it a $100k loan, and only one of them is paying you the whole amount. The gap lives in the fees, and in where the lender puts them.
This guide shows how to turn any offer into the same three dollar numbers: cash in hand, total repaid and cost per $1,000 received. Then you can see which stall is really cheaper.
What’s the difference between the loan amount and the cash you receive?
The loan amount is what you owe the lender. The net advance is what reaches your account. Between the two sit the fees.
There are two common ways a lender handles them:
- Deducted from the advance. The lender takes the fees out before paying you. You owe the full $100k, and you receive $100k minus the fees.
- Added to the balance. You receive the full $100k, and the fees are added on top, so you owe more than $100k.
Either way you pay the same fees. What changes is how much cash you can put to work and what base your repayments are calculated on. A lender who deducts fees also gets to calculate repayments on money you never received, which is why the cash-in-hand figure matters so much.
Which fees get deducted, and which get billed separately?
It varies by lender, and this is the first thing to pin down. Typical items:
| Fee | Often deducted | Often added | Often paid separately |
|---|---|---|---|
| Establishment or application fee | Common | Common | Occasionally |
| Legal fees for documents | Common with private and non-bank lenders | Sometimes | Common with banks |
| Valuation (property security) | Common | Sometimes | Often billed directly to you |
| Broker or introducer fee | Common | Sometimes | Occasionally |
| Monthly account or line fee | No | Sometimes | Usually charged as you go |
Ask the lender for a one-page list of every fee, tagged deducted, added or paid separately. If a fee is “paid separately”, that’s cash out of your pocket on top of the loan, so it belongs in your cost of finance.
For how different stalls tend to structure these, see why lenders quote differently for the same deal.
How do you compare two offers on cash in hand?
Use three steps for every offer.
- Net advance. Loan amount minus the fees deducted.
- Total repaid. Every repayment over the term, plus any balloon or exit fee, plus fees added to the balance.
- Cost of finance. Total repaid, plus any fees paid separately, minus the net advance.
Then divide the cost of finance by the net advance in thousands to get your cost per $1,000 received. That final number is the one that lets you compare a $96k payout and a $100k payout on equal terms.
Illustrative example. A plumbing supplies business in Tauranga needs $100k of working capital for a 12-month term and gets two offers.
| Offer A | Offer B | |
|---|---|---|
| Loan amount | $100,000 | $100,000 |
| Fees deducted from advance | $4,000 | $0 |
| Fees added to the balance | $0 | $2,500 |
| Net advance (cash in hand) | $96,000 | $100,000 |
| Total repaid over 12 months | $110,000 | $113,500 |
| Cost of finance | $14,000 | $13,500 |
| Cost per $1,000 received | about $146 | $135 |
Look at the totals. Offer A asks for $3,500 less in repayments, and a quick glance suggests it’s cheaper. It isn’t. Offer A hands over $4,000 less cash, costs $500 more in total, and works out about $11 dearer for every $1,000 the owner actually uses. And if the owner needs a full $100k to buy stock, Offer A would have to be written as a loan of about $104k, and the gap widens.
Offer A could still be the better choice if, for instance, it lets you repay early with no exit fee and you expect to clear it in six months. The point isn’t that deducted fees are bad. It’s that you can only judge once you’ve done the maths.
Our offer comparer does this arithmetic for you. Put in the loan amount, deducted fees, added fees and total repayments for each offer.
Want a second pair of eyes on the numbers? Tell us what you’re comparing and we’ll talk through which structure suits your cash needs.
Will the offer show you the net advance?
Don’t count on it. The Credit Contracts and Consumer Finance Act is where the familiar disclosure rules live, and it’s aimed at personal credit. The government’s consumer protection site says that for credit used for “commercial or investment purposes” only the protection against oppressive behaviour by lenders applies.
In plain terms, a business loan offer isn’t required to show you net advance, total repaid or total cost in a standard format. Some lenders do it well, and others bury it in the schedule. That puts the job on you, which is why checking a loan offer before you sign is worth ten minutes.
The Commerce Commission also has guidance on unfair contract terms in standard-form business contracts that’s worth knowing about, though whether it covers your particular lending contract is a question for a lawyer.
The government’s own borrowing money guide tells borrowers to “shop around and be prepared”, and notes that early repayment can carry a fee. That’s the other number to check.
What should you ask each lender?
Send the same five questions to every stall, and ask for the answers in writing:
- “What is the net advance, to the dollar, after every fee you deduct?”
- “Which fees are deducted, which are added to the balance, and which do I pay separately?”
- “What are the total repayments over the full term, including any balloon?”
- “What would I owe if I repaid in full at month 6 and at month 12?” (Our guide to early repayment and exit costs explains why this matters.)
- “If I need $100k in hand, what loan amount do I need, and what changes?”
Question 5 is the one most people skip. Lenders will usually write the loan at whatever amount you ask for, so ask for the cash you need, not the round number you first thought of.
Do different stalls put fees in different places?
There’s a pattern, though it’s not a rule:
- Main and smaller banks tend to add or bill fees separately and often show them as a fee schedule alongside the facility.
- Non-bank and private lenders commonly deduct establishment and legal fees from the advance, so the cash you receive is lower than the loan amount. See our guides to non-bank lenders and private lenders.
- Fintech lenders often show a single total fee, sometimes built into the repayment amount, which makes cash-in-hand easy to see but the breakdown harder.
None of those is better or worse in itself. What matters is the full dollars, and our total cost of finance page shows how to line them up.
What’s the quickest way to compare?
Put every offer through the same table: net advance, total repaid, cost of finance and cost per $1,000 received. If two offers are close, the tie-breakers are exit cost, security required and how certain the facility is. Our guide to comparing business loans covers those.
Ready to find an offer where the numbers hold up?
A loan is only useful for the cash it puts in your hands, and plenty of owners don’t see the gap until the money lands. If you’d rather have someone check that with you before you commit, we’re glad to.
The enquiry takes about a minute, and because there’s no credit check just for asking, your credit file stays untouched. We don’t spray your details around a crowd of lenders, so your phone won’t light up. A real person reads your situation, then calls to work out which option fits the cash you need. Please fill the form in accurately, especially the amount you need in hand and the term, so the first option we bring you is a good match.
Frequently asked questions
What does 'fees deducted from the advance' mean?
The lender takes its fees out of the loan before paying you. You're charged and you repay on the full loan amount, but you receive only the amount left after fees. A $100k loan with $4,000 of fees deducted puts $96,000 in your account, and your repayments are still based on $100k.
What's the difference between gross loan amount and net advance?
The gross loan amount is the headline figure on the offer. The net advance is the cash you actually receive after any establishment, legal, valuation or brokerage fees are taken off. Always ask the lender to state the net advance in writing.
Is it better to have fees deducted or added to the loan?
Neither is automatically better. Deducting fees means you receive less cash, so you may need to borrow more to cover what you need. Adding fees means you receive the full amount but the balance starts higher. Compare both by total repaid and cost per $1,000 received.
Do business loans have to show the total cost the way consumer loans do?
Not in the same way. The Credit Contracts and Consumer Finance Act's disclosure rules are for personal credit, and for commercial lending only the protection against oppressive behaviour applies. That means the offer won't necessarily show net advance or total cost for you, so ask for them and work them out yourself.
What fees are usually taken off a business loan?
Common ones are an establishment or application fee, legal fees for the documents, a valuation if property is security, and sometimes a broker's fee. Which are deducted and which are billed separately varies by lender, so ask for a full list with each fee marked 'deducted', 'added' or 'paid separately'.
How do I make sure I receive the amount I need?
Start with the cash you need, add the deducted fees, and ask for the loan amount that nets out at your target. If you need $100k in hand and $4,000 of fees will be deducted, you'd need a loan of about $104k, and your repayments rise with it.