A 40-Year Business Loan Takes $425 Off the Monthly and Adds $613,515 in Interest. RG 273.5 Says the Best Interests Duty Doesn’t Reach the File

What First Federal actually launched

On 5 November 2026, non-bank lender First Federal launched First Business 40, extending its maximum business loan term from 30 years to 40. Australian Broker reported the launch, noting the lender is also accepting commercial property as security for the first time on this product, and pitching it at SME clients refinancing existing business debt — including Australian Taxation Office liabilities — consolidating debts, and funding additional business assets.

The lender’s own broker page for the product sets out the envelope. The advertised starting rate is 7.24% per annum, variable, with rates stated as correct as at October 2026. Loan amounts run from $250,000 to $3,000,000, to a maximum 80% LVR, secured by a registered first mortgage over residential or commercial property, with exclusions noted and all locations considered. Repayments are principal and interest, or interest only for a maximum of five years on investment properties. The page also advertises low income verification requirements, no minimum credit score, unlimited cash out, unlimited debt consolidation including tax debts, extra repayments without penalty, and SMSF availability.

That combination — a 40-year term, 80% LVR, up to $3 million, light income verification, no credit score floor — is an unusually wide envelope by Australian standards. It deserves more scrutiny than a product bulletin usually gets.

What the extra decade buys, and what it costs

Take a $1,000,000 principal-and-interest loan at the advertised 7.24% starting rate and run it over 30 years against 40. The figures below are The Broker Times’ own calculation on that rate, excluding every fee.

The trade is stark. The 40-year term lowers the monthly repayment by $425.59 — a touch over 6% — and raises total interest by $613,515. The client is buying roughly $425 a month of breathing room for something close to six hundred thousand dollars.

The ten-year column matters more than the headline, because ten years is the horizon on which most of these decisions are actually tested — a refinance, an equity release, a sale. On the 40-year schedule the borrower has retired $62,449 of principal after a decade, against $137,093 on the 30-year schedule. That is a $74,644 gap in equity built in the security property — which is, on these files, very often the family home. If the business needs to refinance, release equity, or sell into a softer market in year eight, the 40-year client is standing on a thinner slab.

The capacity claim needs one question answered

A longer term lifts borrowing capacity only to the extent the lender assesses the loan over that longer term. Hold the repayment constant at $6,000 a month and a 40-year amortisation at 7.24% supports about $939,056 against about $880,413 over 30 years — an uplift of roughly $58,600, or 6.7%. Useful at the margin. Not transformative, and nowhere near enough to rescue a file that is 20% short.

But that is the arithmetic of the contract term, not of the assessment. The lender’s published product page sets out the maximum term; it does not state the term over which servicing is assessed. Until you have that figure in writing from the lender or its credit team, the capacity benefit of the extra decade is unquantified. It is a single question, and it is the first one to ask:

• Over what term is servicing assessed on a 40-year First Business 40 loan?
• Is the assessment rate the actual rate, a floor, or the rate plus a buffer — and what figure applies today?
• Are the ongoing and risk fees included in the servicing calculation, or do they sit outside it?

If the loan is assessed over a shorter term than 40 years, the extra decade delivers cash-flow relief after settlement and no capacity at the point of assessment. That is still a legitimate reason to use it. It is a very different conversation from “this gets the deal over the line”, and the file should say which one you had.

The fee stack is where the pricing really sits

The 7.24% starting rate is not the cost of this loan. The lender’s published schedule adds an establishment fee of 0.75% on residential security (0.95% commercial), an application fee of the higher of $1,950 or 0.20% of the loan amount, a risk fee that steps from 0.95% below 60% LVR to 1.25% below 70% and 1.50% below 80% on residential security, a valuation at cost, a discharge fee of $880, and an ongoing fee of 0.10% per month.

On a $1,000,000 loan at 75% LVR against residential property, the published upfront fees come to $24,500 before valuation — about 2.45% of the loan. The ongoing fee is the one to pause on. At 0.10% per month it is 1.20% per annum. If it is charged on the loan balance, it adds about $1,000 a month at the outset and pushes the effective cost of funds from 7.24% toward roughly 8.44%. The lender’s page does not state what the 0.10% is calculated on, so that is a question to settle before you put a number in front of a client, not an assumption to make.

The duty does not follow the loan

Here is the part that most placement conversations skip. ASIC’s own guidance states that the National Credit Code applies to credit contracts where, among other conditions, the credit is provided wholly or predominantly “for personal, domestic or household purposes” or “to purchase, renovate or improve residential property for investment purposes”. Business purposes are not on that list.

The best interests duty is tied to the same perimeter. ASIC’s Regulatory Guide 273 puts it in one sentence at RG 273.5:

RG 273.133 confirms the duty is broad within that perimeter — it “applies to any credit assistance you provide”, including standalone credit products and products packaged with a mortgage. But RG 273.5 is what draws the perimeter in the first place. On ASIC’s own description of scope, a loan that is genuinely and predominantly for business purposes sits outside the Code and outside the duty, even where the security is the client’s own home and the term runs four decades.

So on a First Business 40 file, the obligations that would ordinarily shape a 40-year, 80% LVR recommendation — presenting more than one option, weighing features by benefit to the consumer, documenting why this product over the alternatives — are not legally required. Nothing in that makes the product improper. It does mean the discipline is yours to supply. The thinking you would be obliged to record on a regulated file is thinking the client needs just as much here, and the only thing that will put it on the file is you deciding to.

Two cautions on the characterisation itself. First, whether a loan is genuinely business purpose is a question of fact about the substance of the transaction, not a question of which form was signed. The Broker Times reported in October that AFCA had found a broker-arranged business purpose declaration ineffective where the broker knew the funds were clearing home loan arrears. Second, RG 273.14 records ASIC’s position that the best interests obligations “cannot be avoided by any notice or disclaimer provided to or signed by the consumer”. None of this is a substitute for your licensee’s view on a specific file.

Section 158T is the other half of that sentence

If a longer term, a bigger fee pool and no best interests duty sounds like an incentive, the legislation anticipated it. RG 273.180 describes an anti-avoidance provision whose effect is that a person must not enter into or begin to carry out a scheme if it would be concluded they did so for the sole or non-incidental purpose of avoiding any provision of Part 3-5A, and the scheme has achieved or would achieve that purpose. RG 273.181 notes a person may be liable for a civil penalty for breaching section 158T.

ASIC also sets out how it intends to use it. At RG 273.184 it says it is “more likely to scrutinise schemes that appear to have no commercial purpose other than to avoid the application of the best interests duty, conflict priority rule and conflicted remuneration provisions”. At RG 273.185 it says it is “unlikely to scrutinise schemes that are normal commercial transactions conducted in the ordinary course of business”.

Read together, those two paragraphs are a reasonably clear map. A genuine business borrower refinancing genuine business debt over a long term is an ordinary commercial transaction. A consumer file dressed as a business file to reach a product with a longer term, a lighter verification standard and no duty attached is the other thing. The distinguishing feature is commercial purpose, and commercial purpose is something you evidence at the time, not something you argue later.

Where the product genuinely earns its place

None of the above is an argument against the product. There is a real and growing problem it speaks to directly.

The Australian Taxation Office, responding on 30 June 2026 to an Australian National Audit Office report on its management of small business collectable debt, confirmed that small business debt accounts for around 66% of total collectable debt, with around $35.9 billion owed as at 30 June 2025. The ATO described that debt as “largely undisputed and predominantly self-reported” and said “addressing this debt is critical to maintaining a level playing field”. Australian Broker, citing ANAO figures, reported the small business collectable tax debt had risen 118% since 2018–19.

An unsecured ATO payment arrangement, or short-term unsecured business credit at a factor rate, is expensive and short. A secured facility at a single-digit rate, amortised over a long term, consolidating a tax liability into something a business can actually carry, is a materially better structure for a borrower with usable property equity and a viable business. That is the case for First Business 40, and it is a decent one.

The place it stops being a decent case is where the 40 years is doing the work that the business plan should be doing. If the business only services the debt at a 40-year amortisation with light income verification, the term is not solving a cash-flow timing problem — it is concealing a serviceability problem, against the client’s home, for four decades. That distinction is the whole judgement call on these files, and no regulation is going to make it for you.

What to review on your next business-purpose file