That business loan or lease is going to cost you money, and before you agree to terms, you should understand exactly what the costs involved will be. When you take out a business loan, whether it's for startup expenses, equipment, or expansion, you will pay back the loan over an installment period, with interest.

Besides the interest itself, your loan may also carry a variety of fees. Not all lenders are standardized on how much their fees may be, and what fees they may levy. When taking out the loan, compare and contrast the offerings of a few different lenders to get an idea of the fee structure, or use a broker to help you find the best deal. The difference can be substantial. Read our how to save article and take stock of all the fees your lender will charge, in addition to legal costs, stamp duty, and other charges involved.

Related to the actual cost of financing is the deductible status of your payments. Generally, with a business loan the interest portion of your payment will be fully deductible, and if you are using the proceeds to buy equipment, you may also take depreciation on that equipment. These tax advantages can be balanced against the interest and fees, and often yield a good bottom-line benefit. Leases may have different treatment in regards to taxation, and with certain types of business leases, the entire monthly payment may be deductible. Depending on your tax situation, lease financing may present a big cost advantage.

The interest rate may also vary a great deal between lenders. Although your lender will probably quote an interest rate as a single figure, the rate is actually made up of a number of distinct components including but not limited to: cost of money, lender costs, profit, and risk margin. The cost of money is what the bank actually pays for it, and you can get an idea of this figure from the bank bill rates shown in the daily newspaper. This is the biggest factor that will determine the actual interest rate you are charged; watch for trends in this bank rate to see if it's been going up or down. A variable rate loan will charge you interest based on the fluctuations of this rate. The risk margin is also a major factor in the interest rate; it will cost you more in terms of interest if you have poor credit or little collateral.