What is included in the all-in rate on a business loan?

Interest at the base rate plus margin on the money drawn, any fee charged on the whole limit or on the unused part, and one-off fees such as an establishment fee spread across the years of the facility. Some calculations also include an agency fee, a utilisation fee or the cost of a required hedge. Because the phrase has no fixed meaning in business lending, ask any bank quoting an all-in rate which of these it has counted.

What is the difference between a line fee and a commitment fee?

A line fee is charged on the whole facility limit, whether or not it is drawn. A commitment fee is charged only on the part that is committed but unused. A line fee therefore adds to the cost of drawn money as well as idle money, which a margin comparison misses. Both pay the bank for keeping money available that the borrower may not use.

How do you compare two business loan offers?

Work out the total annual cost of each at the same expected average balance: interest on the drawn amount, fees on the limit or the unused part, and upfront fees divided by the term. Divide each total by that balance. Repeat at a low and a high level of use, because offers with different fee structures change order as usage changes. Then compare the terms that are not price, such as covenants, security and the review date.

Is the all-in rate the same as the APR?

Not formally. The APR in the UK and the comparison rate in Australia are statutory measures for consumer credit, calculated by prescribed rules. A loan to a company falls outside those regimes, so its all-in rate is worked out by whichever method the lender or borrower chooses. The idea is the same, one annual figure that counts the fees, but two all-in rates are comparable only if both were calculated on the same basis.

// WORKED EXAMPLETHE ARITHMETIC A DECISION RESTS ON

All-In Rate on a Business Loan: a Worked Example

Count every fee, then divide by what the business will actually use.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-07

// THE SHORT ANSWER

The all-in rate answers the question a borrower is really asking when two banks send term sheets: what will this facility cost a year, as one percentage? It adds the interest on the money drawn, every recurring fee on the limit or the unused part, and any one-off fee spread over the years it buys, then divides by the balance the business expects to carry. Because it depends on that balance, the same offer has a different all-in rate for a business that uses its line heavily and one that leaves it mostly idle. Two offers compare fairly only at the same usage.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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// 01 — WHY THE HEADLINE RATE IS NOT THE PRICE

A term sheet quotes a margin over a base rate because that is the part a bank sets for the borrower and competes on. The fees sit lower down, and they are where two offers with similar margins come apart. A bank that wants to win a mandate can trim the margin and recover the money in a line fee or an establishment fee. A borrower that compares margins alone is comparing the part of the price the bank chose to show first.

For the lender the all-in figure matters differently. Its pricing model counts the same items as income against the funding, capital and running costs of the facility, and an undrawn limit still uses some capital and some liquidity. That is why banks charge for the unused part at all, and why a borrower that asks for a much larger limit than it needs pays for the difference.

// 02 — HOW IT IS WORKED OUT

Interest = average drawn × (base rate + margin)

Fee on the limit = limit × line fee (or)

Fee on the unused = (limit − average drawn) × commitment fee

Upfront fees = one-off fees ÷ years of the facility

All-in rate = total annual cost ÷ average drawn

The fee structure differs by market and by deal. In New Zealand and Australia, bank facilities for mid-market businesses often carry a line fee on the whole limit, drawn or not. In the UK, and in syndicated loans generally, the unused part more often pays a commitment fee, which many agreements set as a fraction of the margin. Other items can join: a utilisation fee on a revolving facility drawn past a stated level, an agency fee on a syndicated loan, the cost of any hedge the bank requires. Break costs and prepayment fees are usually left out unless the borrower expects to repay early.

// 03 — THE EXAMPLE

A wholesale nursery that supplies garden centres, constructed for this page like every figure in it, needs a US$12m revolving facility for three years. Its drawings swing with the planting season and average about US$7m. The base rate is 4.40%. Two banks offer:

Offer A: margin 1.95%, line fee 0.60% on the limit, upfront 0.50% (US$60,000)

Offer B: margin 2.40%, commitment fee 0.80% on the unused, upfront 0.25% (US$30,000)

Headline rate: A 4.40 + 1.95 = 6.35% B 4.40 + 2.40 = 6.80%

At US$7m drawn:

A 7m × 6.35% = 444,500 + 72,000 + 20,000 = 536,500 ÷ 7m = 7.66%

B 7m × 6.80% = 476,000 + 40,000 + 10,000 = 526,000 ÷ 7m = 7.51%

At US$2m drawn:

A 2m × 6.35% = 127,000 + 72,000 + 20,000 = 219,000 ÷ 2m = 10.95%

B 2m × 6.80% = 136,000 + 80,000 + 10,000 = 226,000 ÷ 2m = 11.30%

Offer A looks 0.45% cheaper on the term sheet. At the nursery's expected usage it costs about US$10,500 a year more. The reason is that A's line fee is charged on the drawn money too, so every drawn dollar costs 1.95% plus 0.60%, or 2.55% over the base rate, against B's 2.40%. A is cheaper only on money left unused, where it charges 0.60% against B's 0.80%. The two offers cost the same at US$4m drawn. Above that B wins; below it A does.

Every figure here belongs to the example and none is a market level. The method is the point: the right offer depends on the balance the business will carry, and a borrower that does not know it should work both offers at a low, an expected and a peak level of use.

// 04 — HOW IT DIFFERS FROM THE APR

Consumer credit has statutory cost measures. In Australia a credit provider advertising fixed-term consumer credit must show a comparison rate that includes most fees and charges; in the UK regulated consumer credit carries an annual percentage rate. Both regimes cover lending to individuals. Australia's code covers natural persons and strata corporations borrowing wholly or mainly for personal, domestic or household purposes or residential investment, and the UK Act treats sole traders and partnerships of two or three persons as individuals, though business lending to them above a statutory amount is exempt. New Zealand's consumer credit law covers credit to natural persons wholly or predominantly for personal, domestic or household purposes. A loan to a company falls outside all three, so a business all-in rate is a convention, and each side can calculate it its own way.

That is why the first question about any all-in figure is what it includes. Some lenders use the phrase for base rate plus margin only; some include the line fee but not the upfront fee; a hedged loan's all-in fixed rate usually means the swap rate plus the margin, without fees.

DEFINED IN ONE PARAGRAPH → · PRICING AND FEES → · THE LINE FEE →

// 05 — WHERE IT DECIDES A FILE

For the borrower it decides the choice between offers, and often the size of the limit. In the example, cutting the limit to US$10m would save US$12,000 a year in line fees under Offer A, if the peak season can be met within it. For the lender it decides whether a discount on the margin is a real concession or a rearrangement. A relationship manager who has matched a competitor's margin by raising a fee has not matched the price, and a credit committee reading the pricing should see the all-in figure at expected usage, not the margin alone.

HOW BANKS PRICE A BUSINESS LOAN → · THE COMMITMENT FEE →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

Australian Securities and Investments Commission, National Credit Code — Sets out that the Code covers credit to natural persons or strata corporations for personal, domestic or household purposes or residential investment, and requires a comparison rate including most fees in advertising fixed-term consumer credit — section 04.
Consumer Credit Act 1974 (UK), section 189(1), definition of 'individual' — Defines 'individual' to include a partnership of two or three persons not all of whom are bodies corporate, which leaves a company borrower outside the regulated regime — section 04.

// QUESTIONS PEOPLE ASK

What is included in the all-in rate on a business loan?: Interest at the base rate plus margin on the money drawn, any fee charged on the whole limit or on the unused part, and one-off fees such as an establishment fee spread across the years of the facility. Some calculations also include an agency fee, a utilisation fee or the cost of a required hedge. Because the phrase has no fixed meaning in business lending, ask any bank quoting an all-in rate which of these it has counted.
What is the difference between a line fee and a commitment fee?: A line fee is charged on the whole facility limit, whether or not it is drawn. A commitment fee is charged only on the part that is committed but unused. A line fee therefore adds to the cost of drawn money as well as idle money, which a margin comparison misses. Both pay the bank for keeping money available that the borrower may not use.
How do you compare two business loan offers?: Work out the total annual cost of each at the same expected average balance: interest on the drawn amount, fees on the limit or the unused part, and upfront fees divided by the term. Divide each total by that balance. Repeat at a low and a high level of use, because offers with different fee structures change order as usage changes. Then compare the terms that are not price, such as covenants, security and the review date.
Is the all-in rate the same as the APR?: Not formally. The APR in the UK and the comparison rate in Australia are statutory measures for consumer credit, calculated by prescribed rules. A loan to a company falls outside those regimes, so its all-in rate is worked out by whichever method the lender or borrower chooses. The idea is the same, one annual figure that counts the fees, but two all-in rates are comparable only if both were calculated on the same basis.

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THE GLOSSARYIN ONE PARAGRAPHAll-in rate (all-in cost) What is the all-in rate on a business loan, and how is it worked out?