How to Compare Business Loan Offers: A 5-Point Scorecard

You have two loan offers in front of you. Both look fine, but they are not the same, and one of them is probably cheaper. How do you tell which? This guide gives you a simple five-point scorecard you can use on any business loan offer, in plain words.

Why can two loan offers look the same but cost differently?

Because the headline number is only part of the story. One offer may have a smaller payment but run for longer. Another may have a low interest number but add fees. Another may charge you to pay it off early.

The fix is simple. Compare the same things on both offers, and look at what you pay in total, not only at one number. That is what the scorecard below is for.

The 5-point scorecard at a glance

Score each offer on these five points. You do not need fancy maths.

1. Total cost. How much will you pay back in total, compared to what you borrow?
2. Payments and time. How big is each payment, how often, and for how long?
3. Fees. What extra charges are there, and what do they cover?
4. Early payoff and flexibility. What happens if you want to pay early, or pay more?
5. What is at stake. What do you have to put behind the loan, and what happens if things go wrong?

Let us go through them one at a time.

Point 1: total cost

Total cost is the amount you pay back, minus the amount you borrowed. That leftover is the real price of the loan.

Why does it matter? Because two offers with different interest numbers, fees and timelines can only be compared fairly in one place: the total. Ask each lender for the total amount you will repay, in writing, including fees. Then do the sum yourself.

Our business loan calculator can help you check the figures. For more on how pricing works in general, see business loan interest rates in Canada.

Point 2: payments and time

Look at three things: how big each payment is, how often you pay (weekly, monthly or another schedule), and how long it lasts.

A smaller payment is easier on your cash flow, but it usually means paying for longer, which can raise the total. A bigger payment hurts more each month but may cost less overall. The right balance depends on how steady your income is. Our guide on cash flow management for small business can help you check what you can carry.

Also check whether the rate can change over time. Our guide to fixed vs. variable business loan rates explains why that matters.

Point 3: fees

Fees are where offers often differ the most. Ask about:

• Set-up or admin fees
• Document or legal fees
• Yearly or monthly fees
• Fees each time you use money, on a line of credit
• Late-payment fees
• Fees for paying early

Ask for all of them in writing, and ask what each one covers. Our guide on APR vs. interest rate vs. fees goes deeper on why a low-looking offer can cost more once fees are added.

If you would like help lining up offers, you can book a short call with our team at any time.

Point 4: early payoff and flexibility

Life changes. You may have a great year and want to pay your loan off early. Or you may need to pay a little less in a slow month. Ask each lender:

• Can I pay early, and does it cost anything?
• Can I pay extra without a charge?
• If I pay early, do I save any of the cost, or is the total fixed?

The answers can be very different. Some loans let you pay off early with no extra charge. Others charge a fee, or keep part of the cost either way. Read more in our guide to prepayment penalties on business loans.

Point 5: what is at stake

This one is about risk. Ask what the lender needs from you to give the loan, and what could happen if you cannot pay:

• Do I need to pledge something? Our guide on secured vs. unsecured business loans explains the difference.
• Is a personal guarantee needed? That is your own promise to repay if the business cannot.
• What happens if I miss a payment? Ask about late fees and any other steps.

Two offers that look the same on cost can be very different on risk. Make sure you are comfortable with what you are putting behind the loan.

A worked comparison of two made-up offers

Example only (made-up numbers, not an offer): Imagine you want to borrow 100 pretend units, and two lenders give you offers.

• Offer A: 10 payments of 11 each, no fees. You pay back 110 in total. Cost of borrowing: 10.
• Offer B: 12 payments of 9 each, plus a set-up fee of 5. You pay back 108 plus 5, which is 113 in total. Cost of borrowing: 13.

Offer B looks gentler each month, because 9 is smaller than 11. But Offer A costs less in total, and finishes sooner. If your cash flow can handle the bigger payment, Offer A may be the better fit. If your cash flow is tight, the smaller payment of Offer B may matter more to you, and that is a fair choice too. The scorecard helps you make the choice with your eyes open. Your own numbers will be different, and they change over time.

What if the offers are for different products?

Sometimes one lender offers a term loan and another offers a line of credit. That is harder to compare, because they work differently. A term loan gives you a lump sum. A line of credit gives you a limit you can use again.

In that case, start with the job the money has to do. If it is one planned cost, a loan may fit. If it comes and goes, a line may fit. Then score each offer on the same five points. Our guide to working capital loans vs. lines of credit can help you decide which type suits your need.

A scorecard you can copy

Write this on a page, once for each offer:

• Lender and product:
• Amount and timeline:
• Payment size and how often:
• Total I will repay, including fees:
• Fees listed in writing:
• Early payoff terms:
• What I must pledge, and any personal guarantee:
• Things I am unsure about:

Fill it in for each offer, then put the pages side by side. Gaps show you what to ask next.

How to run the scorecard, step by step

1. Ask for each offer in writing. Include the amount, the timeline, every fee and the total to repay.
2. Put both offers on one page. A simple table in a notebook works.
3. Fill in the five points for each one.
4. Check the total cost with a calculator.
5. Ask what is unclear. Make the lender explain it in plain words.
6. Pick the offer that fits your cash flow and your comfort, not only the smallest total.

Common mistakes to avoid

• Comparing only the monthly payment. Look at the total too.
• Ignoring fees. They can change which offer is cheaper.
• Skipping the early-payoff terms. Check them now, not later.
• Not asking about what you must pledge. Risk matters as much as cost.
• Choosing in a rush. Offers usually give you time to think.
• Going with only one quote. A second offer gives you something to compare.

Ready for the next step?

A scorecard takes the guesswork out of choosing, but you do not have to do it alone. You can see what could fit your business by booking a short call with our team. It is a short conversation. You can also read how a broker compares with a direct lender, or learn how lendflo works.

This post is general information to help you understand your options. It is not personal financial, legal or tax advice. Details, rates and rules can change, so check the latest information before you decide.