Commercial loan interest rates can potentially influence the financial future of a borrowing business. 

Whether you’re advising clients on refinancing, structuring a new facility, or securing government-backed funding, it may be a good idea to understand how interest rates affect cash flow, tax outcomes, and the overall bottom line.

For Australian brokers, staying sharp on this topic can help you be a better partner. As rates fluctuate and lending programs evolve, your role becomes both transactional and strategic. 

This post will briefly break down how these rates work, what drives them, how they impact profitability, and what you can do to help your clients make smarter financing decisions.

The Basics Of Commercial Loans

Commercial loans can be used by businesses to:

• Fund operations
• Expand facilities
• Buy assets
• Manage cash flow

They typically involve larger sums, varied structures, and bespoke repayment terms. 

They may be secured by property or equipment or left unsecured, which typically comes with a higher interest rate. 

Different Commercial Loan Structures

There are several loan structures that brokers may typically work with:

• Fixed vs. variable rates: Fixed rates provide certainty over the loan term. As the name implies, variable rates fluctuate, potentially offering savings or higher repayments depending on market conditions.
• Interest-only vs. amortising: Some borrowers opt to pay interest only for a period, deferring principal repayments to preserve cash flow.
• Loan terms: The term can range from a few months to a few years depending on the loan type.

It may benefit brokers to understand their clients’ cash flow, asset position, and long-term goals before recommending a loan type.

What Drives Interest Rates?

Commercial loan interest rates are influenced by several market and institutional factors. 

One of the primary factors affecting commercial loan interest rates is the Reserve Bank of Australia (RBA) cash rate target, which influences the broader cost of borrowing across the country. 

Banks and lenders use this as a benchmark and then usually apply margins based on factors such as:

• Business profile of the borrower
• Type of security offered
• Loan term and repayment schedule
• Broader market conditions

Impact On Brokers And Clients

Understanding how commercial loan interest rates may affect a business can help a broker offer real value.

Here’s how brokers can respond to these rates and how they may potentially affect your clients:

For Brokers:

• Consider sourcing competitive yet realistic loan packages that align with your client’s affordability.
• Model repayments under different interest scenarios to help clients plan for the long term.
• You’re responsible for ensuring loan structures meet ATO compliance rules, especially for private company loans.

For Clients:

• Higher rates can reduce free cash flow, hindering hiring, expansion, or day-to-day operations.
• Variable rates can expose borrowers to rising repayment costs, particularly during tightening cycles.
• Appropriate advice from brokers can help clients lock in savings through different prepayment strategies.

When suggesting a commercial loan, it may be beneficial for brokers to present their clients with projections for both fixed and variable rate options.

Structuring Deals with Rate Volatility

Interest rate volatility can pose a challenge for long-term borrowing strategies. 

Brokers can help their clients structure manageable loans, even when market rates swing, with the following financial tools and limits:

• Fixed-rate loans: Protect against rising rates, but may come with break costs if paid off early.
• Split loans: Blend fixed and variable components to manage risk and take advantage of market changes.
• Interest rate caps or collars: Often used in property finance to limit exposure to rate increases.
• Offset facilities or redraws: Help borrowers manage cash flow more flexibly.

For example, the Tasmanian Business Energy Efficiency Scheme offers interest subsidies for eligible energy upgrades. Brokers can help clients take advantage of these programs to reduce exposure to high commercial rates.

Not every client will have the ideal cash flow situation, so brokers can instead find loan options that best suit their clients’ needs.

Commercial Loan Options 

Government-backed commercial loan programs can offer better terms, lower interest rates, or deferred repayments. Brokers who understand these schemes can potentially unlock significant savings for clients.

Current loan options and programs include:

• Farm Investment Loans (via RIC): Up to $2 million, first 5 years interest-only, then principal and interest.
• Drought Loans: Designed for primary producers and small agribusinesses.
• Disaster Recovery Loans: Help businesses rebuild with concessional terms.
• Tasmanian Business Growth Loans: Loans up to $5 million for long-term expansion at competitive rates.
• NSW Small Business Short-Term Loans (pilot): Government support for early-stage ventures with low rates.

These programs and grants often change yearly, so brokers can keep abreast of current trends by regularly checking business.gov.au.

Monitoring And Reviewing Interest Rate Risk

Commercial loan interest rates are not set-and-forget. Brokers may want to consider advising clients to review their financing every 6–12 months, especially if:

• The RBA changes the cash rate.
• A loan is nearing the end of a fixed term.
• The business has grown or taken on new projects.

Brokers can use this quick checklist for client review meetings:

• Are current rates still competitive?
• Does the loan structure still fit your cash flow?
• Are there upcoming changes (e.g., balloon payments or end of interest-only period)?
• Can government programs be tapped to refinance at a lower cost?

Staying proactive can help businesses avoid being caught off guard by rising repayments and can allow them to transition to alternative lending strategies.

Conclusion 

Commercial loan interest rates can affect a borrowing business’s ongoing financial health.

They influence everything from day-to-day cash flow to long-term tax obligations and profitability. 

Understanding how these rates are set and interact with loan structures, ATO rules, and government programs is essential for brokers to offer clients practical, forward-looking advice. 

Keeping up with movements from the RBA and benchmark rates from the ATO can help you guide clients toward smarter financial decisions. 

Regularly reviewing existing loans, modelling repayment scenarios under different interest conditions, and exploring concessional loan options are all part of delivering high-value service. 

When brokers take a proactive, well-informed approach to commercial lending, they can secure funding while protecting their clients’ bottom line.