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Facility fee vs. other lender fees
Commercial lending facilities typically carry several distinct fees. The arrangement fee is a one-off charge paid at or shortly after signing, covering the cost of structuring and agreeing the facility. The facility fee is a recurring charge paid throughout the life of the commitment, calculated on the total facility amount regardless of how much has been drawn. A non-utilisation fee (also called a commitment fee) is calculated only on the undrawn portion.
Some facilities use a facility fee structure in preference to a split arrangement between non-utilisation fees and drawn margin, simplifying the calculation. Others use both. Directors should model all-in cost of funds including every fee type before comparing proposals.
How facility fees are calculated
The facility fee is expressed as a basis-point margin applied to the total facility commitment. It accrues daily on a 365-day year (for sterling facilities) or an Actual/360 basis (for certain euro facilities) and is typically paid quarterly in arrear to the agent bank, which distributes it pro rata to lenders in a syndicated structure.
If a facility is partially cancelled — for example, because the borrower does not require the full amount — the fee base reduces accordingly from the cancellation date. Some agreements provide for the fee rate to step down if the borrower achieves a rating improvement or a leverage reduction milestone.
Negotiating facility fees
Facility fees are negotiable. Larger or more creditworthy borrowers with competitive processes — running multiple lenders in parallel — can typically negotiate lower facility fees, step-down mechanisms linked to performance, or a conversion from a flat fee to a split utilisation/non-utilisation structure that rewards high drawdown rates. For borrowers who expect to draw heavily, a facility fee on the total commitment may be cheaper than a margin-plus-non-utilisation structure. Run the numbers across different utilisation scenarios.
Frequently asked questions
Is a facility fee tax-deductible for a UK limited company?
Recurring finance charges including facility fees are generally deductible as a business expense for UK corporation tax purposes, but the precise treatment depends on the nature and structure of the arrangement. Confirm with your tax adviser.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.