The fee list to demand before you sign, and what each one does to the cost

Ask for it as a list, in dollars

Not a percentage, not a range, not "standard fees apply". A list, in dollars, with the date each one is charged and whether it comes out of your proceeds or your account later.

The request is simple: itemise every amount that will be deducted from the funding, every amount charged during the term, and every amount that can be triggered by something going wrong. A funder that can price your deal in ten minutes can produce that list in ten minutes.

The charges that come out of the wire

The charges that arrive later

Working the list into the cost

Illustrative only — a $100,000 advance at a 1.32 factor, repaid in nine monthly instalments of $14,666.67.

On the headline numbers you repay $132,000 and the cost is $32,000. Solving for the monthly rate that discounts those nine payments back to $100,000 and multiplying by twelve gives an annualised 71.3%.

Now add the fee list: origination $2,500, underwriting $750, ACH set-up $395, UCC filing $150. Total $3,795, all deducted at funding. Your cash is $96,205.

The cost against the money you received is $35,795, the effective factor is 132,000 / 96,205 = 1.3721, and the same annualisation run against $96,205 gives 82.1%. The fee list added 10.8 percentage points to the annualised cost and $3,795 to the bill, and it changed the headline factor not at all.

The fee list on a line of credit is a different list

Revolving facilities hide their cost in charges that have nothing to do with the interest rate, and the effect is largest for the borrowers who use the line least.

Ask for four figures specific to revolvers: the unused-line fee and how the undrawn amount is measured, the annual or renewal fee, any per-draw fee, and whether there is a minimum interest charge or minimum utilisation requirement. Then model the cost at your realistic utilisation, not at full drawdown. A large commitment you rarely use can cost more than a smaller one you use properly.

The fee list in a factoring facility

A different list again, and mostly absent from the quoted discount rate.

• Minimum monthly volume or minimum fee, and the shortfall charge when you miss it.
• Wire or same-day funding fees, charged per transfer, which mount on a facility with daily fundings.
• Credit check fees per new customer approved.
• Invoice processing or schedule fees, charged per invoice or per batch.
• Chargeback and rebill fees on disputed invoices.
• Monthly minimum interest on funds employed, where the facility prices interest separately from the discount.
• Termination fee, tail fee and UCC termination charges on the way out.

Ask for the total of all of these on a representative month, in dollars, not as a list of percentages.

The three questions that do the work

1. Is this deducted from proceeds or added to the balance? Deducted means you get less and repay the same. Added means you get the full amount and repay more. They are not equivalent, and the difference is worth working through on your own numbers.
2. Is it refundable if the deal does not close? Application and due-diligence deposits are the ones to pin down. Get the answer in the document, not in the email.
3. What triggers it? A fee you cannot trigger is a footnote. A fee triggered by one failed debit on a schedule with 126 of them is a running cost.

What to do with the answers

Recompute the cash figure, recompute the cost against that cash figure, and recompute the annualised rate on the same basis for every offer in front of you. The calculators will take the fees as inputs. The point of the exercise is not the rate — it is that a fee list changes the ranking of offers surprisingly often, and the offer with the lowest headline price is frequently the one with the longest list.

If a charge cannot be quantified before signing, write it into the file as unquantified rather than as zero. A blank is not a nil.

Get it into the document

The list is only worth what it is written on. An email saying the ACH fee is $15 does not stop a contract that permits the funder to set fees at its discretion and amend them on notice.

Search the agreement for fees, charges, costs, expenses and in its sole discretion, and read every clause that comes back. Where the document says fees are as set out in the funder's current schedule, ask for that schedule attached as an exhibit and ask whether it can be changed during the term. A fee schedule the other side can rewrite unilaterally is not a price.