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Unused Line Fee
Also called commitment fee, non-use fee, unused commitment fee, facility fee.
A periodic charge on the part of a committed line you have not drawn, paid because the lender is holding capital available to you whether or not you use it.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
A committed line obliges the lender to fund on demand. That obligation has a cost on the lender's side — capital held against a commitment it cannot deploy elsewhere — and the unused line fee is how it is recovered.
How it is calculated
An annual percentage applied to the average undrawn balance, accrued daily and billed monthly or quarterly. Some agreements measure the undrawn amount against the commitment; asset-based facilities sometimes measure it against availability instead, which is a different and usually smaller number.
Variants that price very differently
Where it appears
Bank operating lines, asset-based revolvers and syndicated facilities as standard. Occasionally on fintech lines. Rarely on business cards, which earn from interchange and interest instead.
The all-in cost of a line therefore has two components moving in opposite directions: interest on what you draw and a fee on what you do not.
Where this one catches people
Taking the largest line you were approved for has a running cost, and it is invisible because it arrives quarterly in small amounts rather than at closing in one lump. Asking for double what you need means paying every quarter for headroom you never touch.
Work it out in dollars before accepting the bigger commitment, then decide whether the extra headroom is worth that annual figure. Sometimes it plainly is — a seasonal business with a genuine peak, or a contractor bidding work that could land at any time. Often it is not.
Check the structure too, not just the rate. A facility fee on the whole commitment and an unused fee on the undrawn portion produce very different totals for a heavy user, and the two are described in similar language on a term sheet.
Worked through
Illustrative only. A $750,000 committed line with an unused line fee of 0.50 percent a year. Over the year the average drawn balance is $200,000.
Average undrawn = 750,000 − 200,000 = $550,000. Fee = 550,000 × 0.005 = $2,750 for the year.
Had the same borrower taken a $400,000 line, average undrawn would be $200,000 and the fee $1,000.
The extra $350,000 of headroom cost $1,750 a year to keep on the shelf, on top of interest on everything actually drawn.
Under a facility fee of 0.50 percent on the whole commitment instead, the $750,000 line costs 750,000 × 0.005 = $3,750 a year whether it is drawn or not — and unlike the unused line fee, that number does not fall as you use the facility.
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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Unused Line Fee — common questions
What does unused line fee mean?
A periodic charge on the part of a committed line you have not drawn, paid because the lender is holding capital available to you whether or not you use it.
Where does unused line fee catch people out?
Taking the largest line you were approved for has a running cost, and it is invisible because it arrives quarterly in small amounts rather than at closing in one lump. Asking for double what you need means paying every quarter for headroom you never touch.
Is unused line fee the same as an interest rate?
Unused Line 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 unused line fee apply to?
Working Capital, Business Line of Credit, Asset-Based Lending.
Is there a worked example of unused line 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 unused line fee?
Clean-Up Provision, Commitment letter, Credit Limit, Draw, Fee schedule.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
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.