01
Security
The largest single lever. A facility secured over property prices materially below an unsecured one, and the difference persists for every year the facility runs.
Guide
A rate is not a price on a facility like this.
Two facilities quoted at the same rate can cost very different amounts, because the rate applies to what is drawn and several of the charges do not.
MS
Matt Stiles Editor
Published 8 September 2026 Last reviewed 8 September 2026 Read time 12 min
The short version
Five lines that make two quotes comparable.
- The rate covers one charge out of several. Interest on the drawn balance is the only charge that responds to usage, and on a lightly used facility it is not the largest.
- The line fee is charged on the limit. A larger limit costs more to hold whether or not the extra headroom is ever used.
- The right comparison is an annual total. Interest on the expected average drawn balance, plus every standing charge, in dollars.
- Usage decides which quote wins. A heavy user should optimise the rate; a light user should optimise the line fee. The same two quotes reverse.
- Indicative only. This is general information rather than advice, and every figure is illustrative.
The charges
Every charge, and what it is calculated on.
Not every facility carries all of these, and a proposal naming only the first is describing a fraction of the cost.
| Charge | Calculated on | Frequency | Responds to usage |
|---|---|---|---|
| Interest | The drawn balance, daily | Charged monthly | Yes |
| Line or facility fee | The approved limit | Monthly or annually | No |
| Commitment fee | The undrawn portion | Periodically | Inversely |
| Establishment fee | The facility | Once | No |
| Review or renewal fee | The facility | At each review | No |
| Excess fee | A balance above the limit | Per occurrence | Only if exceeded |
| Dishonour fee | A failed payment | Per occurrence | Only on failure |
| Security and registration costs | Disbursements | As incurred | No |
Indicative charge structures across the New Zealand market. Any particular facility is priced by its lender.
The two that behave oddly
A line fee and a commitment fee are not the same thing.
A line fee is charged on the whole approved limit regardless of what is drawn. A commitment fee is charged on the undrawn portion, so it falls as the facility is used and rises as it is repaid. They are frequently confused and they produce opposite incentives.
Under a line fee, a business pays the same to hold the limit whether it uses it or not, so an oversized limit is straightforwardly wasteful. Under a commitment fee, a facility drawn heavily costs less in fees and more in interest, and the two partly offset.
Most small business facilities in New Zealand carry a line fee. Committed facilities at larger amounts more often carry a commitment fee, which is consistent with what each is paying for: capacity in the first case, and an obligation to keep capacity available in the second.
Worked example
Two quotes, and how the answer reverses.
Lender A offers a $200,000 limit at 12% with a 1.0% line fee. Lender B offers the same limit at 14% with a 0.3% line fee. On rate alone A is clearly cheaper, and most comparisons would stop there.
A business expecting an average drawn balance of $140,000 pays A roughly $16,800 in interest plus $2,000 in line fee, which is $18,800. It pays B roughly $19,600 plus $600, which is $20,200. A wins by $1,400.
A business expecting an average drawn balance of $25,000 pays A roughly $3,000 plus $2,000, which is $5,000. It pays B roughly $3,500 plus $600, which is $4,100. B wins by $900. Same two quotes, opposite answers, decided entirely by how much the facility is actually used.
Illustrative annual cost
- Heavy user, lender A
- ~$18,800
- Heavy user, lender B
- ~$20,200
- Light user, lender A
- ~$5,000
- Light user, lender B
- ~$4,100
Illustrative on stated assumptions and rounded. Not a quote or offer of credit.
The question that settles it
The annual total on your own expected usage, in dollars.
Give each lender the same two numbers, the limit being sought and the average drawn balance the business realistically expects, and ask for the total annual cost including every fee. Any lender can produce it, the answers are directly comparable, and the exercise surfaces the standing charges that a rate comparison hides entirely. Where a lender will not produce it, that is informative in itself.
What moves the price
Four things that determine what a business is quoted.
Understanding these makes it clear which parts of a quote are negotiable and which follow from the position.
02
Trading history and conduct
Length of record, consistency of income and how existing facilities have been conducted. A clean revolving history with another lender is a strong argument at a review.
03
Limit size
Larger facilities frequently price better per dollar and cost more in line fee. The two pull in opposite directions, which is why the total on expected usage is the only useful comparison.
04
Whether the facility is committed
A committed facility costs more, because the lender is obliged to keep the limit available. That premium is buying certainty rather than money.
Negotiating
Which charges actually move.
The establishment fee is the most negotiable, particularly where a business is moving a facility from another lender. It is a one-off, it costs the lender little to waive, and it is frequently reduced or removed on request rather than on argument.
The line fee moves less often and does move, particularly where the limit is larger than the business will realistically use. Asking whether a smaller limit at a lower fee would suit, and what that does to the rate, produces a more useful conversation than asking for a discount.
The rate moves least in a single conversation and most over time. A business with two more years of clean conduct, a lower average balance and a cleaner review history is a different proposition from the one that signed, and asking for a review of pricing at that point is ordinary rather than presumptuous.
Against other instruments
Where a revolving facility sits on cost.
Compared on the same drawn amount over the same period, so the structural differences show rather than the conventions.
| Feature | Revolving facility | Term loan | Business card |
|---|---|---|---|
| Rate on the amount used | Moderate | Lower | Highest |
| Standing charges | A line fee | Usually none after establishment | An annual fee |
| Cost if the money is not needed | The line fee only | Full interest | The annual fee only |
| Cost if used briefly each month | Small | Full interest | Nothing, if cleared |
| Cost if drawn permanently | High | Lower | Highest |
The last two rows describe the whole hierarchy. Cleared monthly, a card is cheapest; used for weeks at a time, a revolving facility; drawn permanently, a term loan. Very few businesses use all three deliberately, and the ones that do save real money.
The charge nobody budgets for
Review and renewal costs.
A facility reviewed annually may carry a review fee, and where security is involved there can be valuation and legal costs at renewal as well. On a small facility those can be a meaningful share of the annual cost and they are almost never included in the comparison at the outset.
They are also the charges most likely to be discovered rather than quoted. Asking what happens at review, what it costs and how often it happens is a fair question at the application stage, and the answer differs considerably between lenders.
For a business holding a facility for several years, the sum of review costs over the period can exceed the establishment fee it negotiated hard over at the start. Including them in the annual total puts them where they belong.
Method
How this guide was written, and its limits.
The charge structures described are those in general use in the New Zealand market, and the figures used are illustrative rather than any lender’s published pricing. Rates, line fees, review costs and what is negotiable vary considerably by lender, by security and by applicant.
No rate levels are published here for the same reason they are not published on the facility pages. A figure quoted on a page that stays up for months describes a market at a moment rather than an offer to a reader, and the only numbers that matter are those a lender puts in writing.
Nothing here is financial advice. This site is not a lender, a broker or a registered financial adviser, and what a particular business will be offered depends on facts a website cannot see.
Variable rates
What happens when the rate moves.
Most business revolving facilities in New Zealand are variable, which means the rate can move during the life of the facility. That is ordinarily tied to a reference rate or to the lender’s own business base rate, and the agreement sets out how changes are notified.
The practical consequence is that a facility compared and chosen on a rate can be at a different rate six months later. That is not a reason to ignore the rate, and it is a reason to weigh the standing charges and the limit at least as heavily, because those move less.
It also makes the annual review of the statement worth doing. A rate that has drifted upward without much prominence is a cost the business is carrying without having decided to, and asking about it is ordinary rather than confrontational.
What to ask before signing
Five questions with short answers.
Whether the facility is committed or uncommitted, because that decides how much weight to put on the limit. Whether there is a clean-down condition, because that decides whether the balance has to reach nil. What the review cycle is and what it costs, because those recur. What the excess and dishonour fees are, because those are avoidable once known. And what the total annual cost is on a stated limit and a stated average drawn balance.
All five have one-line answers and all five are in the agreement. Asking them at the application stage rather than reading them afterwards takes a few minutes and it is the difference between a facility that behaves as expected and one that produces surprises.
A lender that answers all five directly is also telling the business something useful about how the relationship will run, which is worth knowing before rather than after.
Where the money actually goes
Four charges ranked by what they cost across a year.
Ordered as they typically fall on a moderately used facility. The ranking reverses on a lightly used one, which is the point.
01
Interest on the drawn balance
Ordinarily the largest on any facility that is genuinely used, and the only charge that responds to how the business behaves. It is also the one most affected by repayment timing.
02
The line fee
Second on a used facility and first on a held one. Charged on the limit, so it is the reason an oversized limit costs money for nothing.
03
Review and renewal charges
Recurring, frequently unquoted at the outset, and larger where security requires revaluation. Over several years they add up to more than most establishment fees.
04
Excess and dishonour fees
Smallest in dollars and the most avoidable, and their real cost is the signal rather than the amount. A facility run with genuine headroom incurs neither.
A worked total
What a year on a modest facility actually costs.
A $100,000 limit at an indicative 14% with a 0.6% line fee, an average drawn balance of $30,000, a $500 establishment fee in year one and a $250 annual review charge. Interest is roughly $4,200, the line fee is $600, and the review charge is $250.
That is about $5,050 in a steady year and $5,550 in the first. Expressed against the average drawn balance it is roughly 18%, against a headline rate of 14%, and the gap is entirely the standing charges applied to a facility that is only three-tenths used.
The same facility drawn to $80,000 on average costs about $12,050, which is roughly 15% against the balance. The headline rate becomes more representative the more the facility is used, which is the single most useful thing to understand about comparing quotes on rate alone.
The security disbursements
The costs attached to taking security, which are not a fee.
Where a facility is secured, the register searches, the registration itself and the legal work are costs the business ordinarily bears, and they are passed through rather than charged as a fee. On a general security agreement over a business they are modest. Where property is involved, a valuation and property legal work on both sides make them considerably larger.
They are one-off in the first year and they recur wherever a review requires a fresh valuation, which on property-secured facilities is more common than businesses expect. Asking how often revaluation is required, and who pays for it, is a fair question at the outset.
Included in a first-year total they can change which of two offers is cheaper, particularly on a modest facility. Excluded, as they usually are from a quoted rate, they arrive as a surprise at settlement.
The largest component
What the drawn balance costs.
Interest on the average drawn balance is the component that responds to usage. Add the line fee and the standing charges to get the annual total. Indicative only, and not a quote or offer of credit.
Indicative interest cost
Weekly
$175/week
$758 /month $9,100 a year while drawn
$200,000
$5,000 $500,000
$70,000
Nothing drawn Fully drawn
13.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $200,000 scenario
$70,000 drawn at 13.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
References
Sources
- Commerce Commission
The regulator whose guidance covers fee disclosure and misleading representations about cost.
- Fair Trading Act 1986
The statute behind the prohibition on misleading representations about the price of a service.
- Reserve Bank of New Zealand, statistics
Context for New Zealand business lending rates and why indicative bands move.
- Personal Property Securities Register
The register whose search and filing fees appear as disbursements on a secured facility.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
Questions, answered
Why can two facilities at the same rate cost different amounts?
Because interest applies to the drawn balance while the line fee applies to the whole limit, and the standing charges apply regardless of either. A larger limit at the same rate costs more to hold.
What is a line fee?
A charge on the approved limit, payable whether or not the facility is used, because the lender is holding capacity available. On a lightly used facility it can be most of the annual cost.
What is a commitment fee?
A charge on the undrawn portion of a committed facility, so it falls as the facility is drawn. It is paying for the lender’s obligation to keep the limit available rather than for the capacity itself.
How do I compare two quotes properly?
Give each lender the limit sought and the average drawn balance realistically expected, and ask for the total annual cost including every fee, in dollars. Those figures are directly comparable and headline rates are not.
Which quote wins on a lightly used facility?
Ordinarily the one with the lower line fee, even at a higher rate, because the standing charge dominates when the drawn balance is small. On a heavily used facility the answer reverses.
Which charges are negotiable?
The establishment fee most readily, particularly when moving from another lender. The line fee sometimes, especially where the limit is larger than the business will use. The rate least in a single conversation and most over time.
Are review costs significant?
They can be, particularly where security requires revaluation. Over several years they can exceed the establishment fee, and they are almost never included in an initial comparison, which is why asking about them upfront is worthwhile.
Does a bigger limit always cost more?
In line fee, yes, since it is charged on the limit. In rate, frequently less, since larger facilities can price better per dollar. The two pull in opposite directions, which is why only the total on expected usage settles it.
What does security do to the price?
It is the largest single lever, and the effect persists every year the facility runs. A property-secured facility prices materially below an unsecured one and ordinarily carries a larger limit as well.
Is interest charged on fees?
Where fees are debited to the facility rather than paid separately, they become part of the drawn balance and accrue interest from that point. On a facility running near its limit they can also produce an excess.
Should pricing be reviewed after a few years?
Yes, and it rarely happens without being asked. A business with a longer clean record and a better usage pattern is a different credit proposition from the one that signed, and requesting a review is ordinary.
Is this guide financial advice?
No. It explains a pricing structure in general terms. This site is not a lender, a broker or a registered financial adviser, and what a particular business is offered depends on facts a website cannot see.
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