Glossary

Arrangement fee

An arrangement fee is a one-off charge a lender makes for setting up a loan or facility — often a percentage of the amount borrowed, and sometimes taken out of the funds before you receive them.

2 min read

One-offCharged at set-up

% or flatOften a % of the loan

Definition

An arrangement fee (or facility fee) covers the cost of assessing, documenting and setting up your finance. It may be a flat sum or a percentage of the loan, and it can be added to the balance, paid separately, or netted off the advance so you receive less than the headline amount.

In plain terms

If you are told you can borrow £50,000 with a 2% arrangement fee deducted, £1,000 comes off and you actually receive £49,000 — while often still repaying interest on the full £50,000. That quietly raises the true cost.

Why it matters for your company

An arrangement fee can turn a low-rate loan into a worse deal than a higher-rate one with no fee. Always fold it into the total repayable before comparing, and read business finance fees explained.