Questions to ask any lender before you sign

Most business loan problems aren’t caused by bad lenders. They’re caused by assumptions: the borrower assumed early repayment was free, or that the guarantee only covered this loan, or that a missed payment would just be added to the end. Every one of those assumptions can be checked with a question before you sign.

Here are the questions worth asking every lender, grouped by what they protect you from.

Questions about the real cost

“What will I repay in total, in dollars, if I keep the loan for the full term?” This is the single most useful question. It cuts through different ways of expressing price and gives you one number you can compare across offers.

“What fees are included in that total?” Ask for a list: establishment or application fees, broker fees, legal and registration costs, valuation fees, monthly account fees, line fees on a facility you may not fully use, and discharge fees at the end.

“Are any costs deducted from the loan amount?” If fees are taken out of the advance, you’ll receive less than the headline figure. Make sure the amount that actually lands in your account covers what you need.

“Is the price fixed for the whole term, or can it change?” Some facilities are reviewed periodically. Know what can change and when.

Every loan is priced on the individual situation, so comparing headline figures across lenders is rarely meaningful. The total cost for your loan is what matters.

Questions about getting out early

“What does it cost to repay early?” Some loans have early repayment costs or minimum interest periods; others don’t. If there’s any chance you’ll refinance, sell or receive a large payment during the term, this can matter more than the headline price.

“Can I make extra repayments without penalty?” Useful if your cash flow is seasonal or lumpy.

“How much notice do you need to close the loan?” If you’re planning a bank refinance, you’ll need a payout figure on a specific date.

Questions about security and guarantees

“What security are you taking, exactly?” For a property-secured loan, which property and which ranking (first or second mortgage)? For an unsecured loan, are you registering a general security interest over business assets on the PPSR? Our guide to the PPSR and general security agreements explains what that means.

“Who needs to give a personal guarantee, and is it limited?” Is the guarantee capped at a specific amount, or unlimited? Does it cover only this loan, or all present and future debts to this lender? Read our guide to directors’ guarantees before agreeing.

“Does anyone else need to sign?” Co-owners of a property, trustees, spouses — find out early so they can arrange independent legal advice.

Questions about when things go wrong

“What happens if I miss a repayment?” Ask about default fees, default interest and how quickly the lender escalates. Understanding this doesn’t mean you expect to miss one — it means you know how much room you have.

“Who do I talk to if trading gets tight?” Good lenders would rather hear early. Know who to call.

“Under what circumstances can you call the loan in early?” Loan agreements list events of default beyond missed repayments — for example, other debts going into default, or a change in ownership. Know what they are.

Questions about timing and process

“What’s left to do before approval, and before funds are paid?” Get a clear list, with who’s responsible for each item.

“When exactly will funds be paid, and where?” Directly to you, to your lawyer’s trust account, or straight to a creditor such as Inland Revenue?

“Is this approval final, or conditional?” Conditions might include a valuation, a clean title search or signed guarantees. Know which are still open.

Red flags in a lender’s answers

Most lenders answer these questions without hesitation. Be cautious if you notice:

• Reluctance to give the total cost in dollars. Any lender can calculate it.
• Pressure to sign today without time to read the documents or get legal advice.
• Fees that appear for the first time in the final documents.
• Vague answers about security — “just standard terms” instead of a clear description of what’s being secured.
• Requests for upfront payments before any approval, to “unlock” a loan.
• Unwillingness to put verbal promises in writing.

None of these automatically mean something is wrong, but each one is a reason to slow down and ask more questions before you commit.

Questions to ask yourself

Lenders will ask you most of these anyway. Better to have answered them honestly first:

• What exactly is this money for, and does it earn more than it costs?
• How will I repay it if the plan takes longer than expected?
• If I’m using property as security, have I talked it through with everyone who lives there or co-owns it?
• Am I borrowing what I need, or what I’m offered?

How the Hotline handles this

Our lending specialists expect these questions and answer them plainly. When we put an option from our lending partners in front of you, we’ll walk through the total cost, the fees, early repayment, security and guarantees before you commit — and we’d rather you pause than sign something you don’t understand. Our companion guide on how to read a business loan offer shows where to find each answer in the paperwork.

Ready to talk? Ring the Hotline, or request a call back.