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Origination fee
Also called closing fee, funding fee, administrative fee, underwriting fee.
A charge for putting the transaction on the books, usually deducted from the disbursement rather than billed, so the business receives less than the approved figure.
Drafted with AI assistance and checked by a person. Its factual claims were verified against the sources listed at the end, by Find Me Funders research desk.
What it means
Quoted either as a flat dollar amount or as points - a percentage of the funded amount. It may be labelled origination, underwriting, administrative, documentation or closing, and a single deal sometimes carries several of these at once.
Timing is what matters. A fee deducted from the disbursement costs more than the same fee added to the repayment, because the borrower never has use of the money but pays cost on it anyway. On an interest-bearing loan the fee is generally included in the finance charge for any annual percentage rate calculation, so it shows up in the APR. On a factor-rate advance there is no APR to show it in, and the purchased amount is unaffected by the fee - it is computed on the purchase price before deduction.
Some fees are genuinely third-party pass-throughs - UCC filing, appraisal, site inspection, legal - and those are usually itemised separately. Whether they are marked up is worth asking.
Where this one catches people
On a factor-rate advance, an origination fee deducted from the purchase price raises the real cost by more than its face value, because the purchased amount does not shrink to match. You pay the fee, then you pay the factor rate on the money that went to the fee. Compare offers on net cash received against total dollars repaid; the fee then prices itself.
Worked through
Illustration. Purchase price $50,000 at a factor rate of 1.30 gives a purchased amount of $65,000. A 4% origination fee of $2,000 is deducted, so $48,000 arrives.
Measured against what was charged, the cost is $15,000 on $50,000 - 30%. Measured against what was received, it is $17,000 on $48,000 - about 35.4%. The fee is nominally four points and effectively adds more than five to the cost of the usable money.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Sources and checks
Every figure on this page traces to a document someone read, on a date. Where a check is past its review date it says so rather than passing as current.
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a 4-point fee on a 50,000 / 1.30 advance moves the cost from 30% of the amount charged to 35.4% of the money received, adding more than five points
example50,000 x 1.30 = 65,000 purchased amount; cost against the purchase price = 15,000 / 50,000 = 30.0%. Fee = 4% x 50,000 = 2,000, so 48,000 arrives. Cost against cash received = (65,000 - 48,000) / 48,000 = 17,000 / 48,000 = 35.4167%. 35.42 - 30.00 = 5.42 percentage points, i.e. 'more than five', from a fee nominally worth four.
Origination fee — common questions
What does origination fee mean?
A charge for putting the transaction on the books, usually deducted from the disbursement rather than billed, so the business receives less than the approved figure.
Where does origination fee catch people out?
On a factor-rate advance, an origination fee deducted from the purchase price raises the real cost by more than its face value, because the purchased amount does not shrink to match. You pay the fee, then you pay the factor rate on the money that went to the fee. Compare offers on net cash received against total dollars repaid; the fee then prices itself.
Is origination fee the same as an interest rate?
Origination fee is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does origination fee apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit, SBA Loan.
Is there a worked example of origination fee?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside origination fee?
Annual percentage rate, Factor rate, Net funding, Points, Purchase price.
Has this definition been checked?
Yes. Its claims were verified against the sources listed at the end of this page, and the reviewer is named.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.