What fees should I expect on a business loan?

Arrangement fee

The arrangement fee — sometimes called an origination fee or facility fee — is the most common charge on a business loan. It covers the lender's cost of underwriting and setting up the facility and is typically expressed as a percentage of the loan amount. It may be deducted from the advance on drawdown, added to the loan balance, or charged separately up front.

Percentage ranges vary by lender and product type; shorter-term products often carry higher percentage fees because the absolute amount is lower. Always confirm whether the arrangement fee is included in the APR or total repayable figure you are quoted, or whether it is additional.

Documentation and legal fees

Secured loans — particularly those involving a debenture, fixed charge, or property security — often require the lender's solicitors to draft or review security documentation. The cost is typically passed to the borrower. For straightforward facilities this may be a fixed fee; for complex or large transactions it may be billed at hourly rates. Ask for an estimate before proceeding and confirm whether the fee is payable if the deal does not complete.

Drawdown and administration fees

Some revolving credit facilities charge a drawdown fee each time the borrower accesses the facility — a small fixed amount or percentage per drawdown. Monthly or annual administration fees cover account maintenance and reporting. These can add meaningfully to the total cost of a facility used frequently, so factor them into any comparison.

For a method to add all fees into a single comparison figure, see How do I work out the total repayable?

Exit and refinance fees

In addition to any early repayment charge on the interest element, some lenders apply a separate exit fee when a facility is closed or refinanced before its scheduled end. This is distinct from the ERC: the ERC compensates for lost interest, while an exit fee is an additional administration charge. Both may apply simultaneously, so check the term sheet carefully for both.

See Will I pay a charge to repay early? for detail on ERCs.

Fees to scrutinise

Some fees are worth querying: valuation fees for assets that are straightforward to value, repeated monitoring fees above a nominal level, and fees for producing standard loan documentation that the lender's team handles routinely. None of these are necessarily unreasonable, but a director who asks for a full fee schedule before signing is better placed to negotiate. Request every fee in writing, in a single schedule, before accepting any offer.