What is a non-utilisation or commitment fee?

2 min read

On undrawn fundsThe part you don't use

Reserves capitalLender holds it for you

Small %Below the interest rate

Committed linesWhere it applies

Why the fee exists

When a lender commits to a facility limit, it has to hold capital ready to meet any draw you might make. That reservation has a cost, and a non-utilisation or commitment fee passes a slice of it on. You pay a small percentage — well below the interest rate — on the portion of your limit you have not drawn. Draw the whole facility and the fee falls to nil; leave most of it idle and the fee applies to that idle balance.

Where you will meet it

Commitment fees are typical on larger committed revolving facilities and syndicated lending, less so on small-business term loans. They are the flip side of availability: the reason the money is there the instant you need it is that the lender is holding it, and the fee funds that promise. It is not a penalty — it is the price of standby capital.

Is it worth paying?

The calculation is about how much standby you genuinely need. If a committed line lets you seize opportunities or ride out cash-flow gaps that would otherwise sink you, a modest non-utilisation fee can be cheap insurance. If you are paying to reserve a large limit you rarely touch, an uncommitted facility — or simply applying when a need arises — may cost less. Size the committed limit to your real requirement.

Weigh the standby cost against the benefit, model it on the true cost calculator, and see all fees explained. To discuss a committed line, explore a facility.

Frequently asked questions

How much is a typical non-utilisation fee?

It is usually a fraction of the interest rate — a small percentage per year on the undrawn balance. The exact figure depends on the lender, the size of the facility and your risk. Ask for it to be quoted alongside the interest rate so you can see the full cost of keeping the line open.

Can I avoid the fee by not committing to a limit?

Yes — an uncommitted or on-demand facility, where the lender does not guarantee availability, typically has no commitment fee because no capital is reserved. The trade-off is certainty: without a committed limit, the funds may not be there when you need them. Whether that trade is worth the saving depends on how critical guaranteed access is to your business.