Letter of offer

The Letter of Offer is the point where a conversation about a loan becomes a document. Everything discussed on the phone, the amount, the term, the security and the costs, is written down in one place, along with the conditions the lender needs satisfied before it releases funds.

What does a Letter of Offer for a secured business loan set out?

Item	What it tells you	What to check
Borrower and guarantors	Who is borrowing and who is guaranteeing	Correct entity names, ABN or ACN, and trustee capacity
Loan amount	The advance, and how much you’ll receive after deductions	That the net figure meets your actual need
Term and maturity	When the loan must be repaid	That it fits your exit with a buffer
Security	Which property, and whether by first mortgage, second mortgage or caveat	Every title listed, and any third-party security
Interest	Pricing, and whether interest is prepaid, capitalised or paid monthly	How early repayment and default are handled
Fees and costs	The assessment fee and other costs	Who pays legal, registration and settlement costs
Conditions	What must happen before settlement	Anything you can’t meet, or meet in time
Expiry	How long the offer stands	That you can return it in time

Read the offer as a whole, not clause by clause in isolation. The amount, term, interest arrangement and exit all depend on one another: a shorter term may look cheaper but leave no room if a sale is slow, and a larger advance may need a second property as security. If something in the offer doesn’t match what you discussed, raise it straight away. Offers are prepared quickly, and an early question is easier to fix than a late one.

Our longer guide, Letter of Offer explained, works through each clause in detail.

How is it different from the loan agreement?

Think of the Letter of Offer as the summary of the deal and the loan agreement as the rulebook. The offer sets the commercial terms. Once you accept, the lender’s solicitors prepare the formal documents: the loan agreement, the registered mortgage or caveat and charge, and any guarantees. Those should match the offer. If they don’t, ask why before you sign.

Two practical steps follow acceptance. Identities are verified, because ARNECC’s rules require mortgagees to take reasonable steps to verify the identity of mortgagors and other signers, often through an identity agent. Then the conditions are worked through and settlement is booked. The documents checklist shows what you’ll be asked for.

Why does the Letter of Offer matter to a borrower?

It’s your best chance to see the whole cost and every obligation before anything is registered on your title. A few minutes with it can save weeks later:

• Check the net amount. Prepaid interest, fees and costs can come out of the advance.
• Check the exit fits. A term that’s too tight invites default interest.
• Check the conditions. Insurance, consents and payout letters all take time to arrange.
• Check the default clauses. Small business standard form contracts, including loans, are covered by the unfair contract terms law, which ASIC enforces for financial products.

Business.gov.au’s advice to business borrowers is simple: make sure you’ll be able to repay before you borrow. The Letter of Offer is where you test that against real numbers. Have your solicitor or accountant read it with you, and keep a copy with your settlement papers so you can check the final figures against it.

Illustrative example: a Canberra IT services company asks for $180k against a director’s investment property to fund a contract mobilisation. The Letter of Offer arrives the next morning: a 9-month term, interest prepaid, the assessment fee listed, and three conditions: a payout letter from the first mortgagee, the first mortgagee’s consent, and evidence of building insurance. The director notices the net advance is a little short of $180k once prepaid interest is deducted, asks for the loan to be resized, and receives a revised offer the same day before signing.

Which related terms should I know?

• Prepaid interest and capitalised interest: the two no-repayment options an offer may include.
• Exit strategy: what the term in your offer is built around.
• How it works: the process from enquiry to settlement.

The full list lives in the glossary. When you’d like an offer of your own, begin with a short enquiry.

Want to see terms in writing?

Tell us about the property, what’s owing on it, the amount you need and how you’ll repay it. Enquiring involves no credit check, your enquiry goes to one direct lender rather than a panel, and a real specialist reviews it. Accurate answers mean the Letter of Offer you receive reflects your actual deal, with fewer surprises between offer and settlement. See if you qualify.