Today there are fees for just about everything we do and in the business environment many are justified and many are simply a way for a company to make extra revenue. Banks and other commercial lenders are notorious for their fees, many of which are not disclosed to a borrower until they are signing loan documents.
We believe you should know what fees are being charged and what they are for. We’ve compiled the fee list below so the next time you apply for a commercial lease or loan you’ll be a little smarter.
• Documentation Fees – this is a fee most commercial lenders charge for preparing a set of documents. Most lenders will charge between $150 and $200 and sometimes higher due to the complexity of a specific situation. Some commercial brokers double or triple this and keep the difference.
• Inspection Fees – this is a fee for doing a physical inspection of the asset once it is in place in a customer’s facility. It protects the lender and the customer and generally costs between $150 and $200. Some commercial brokers increase this amount and keep the difference.
• Application Fees – only a few companies charge Application Fees and it’s simply a way to make more money.
• Search Fees – if you are financing a piece of equipment that was acquired from a private party seller rather than an equipment vendor or if you have had possession of the asset for more than 15 days a Uniform Commercial Search is generally required to verify the lender’ lien is a priority and not subject to any preexisting liens. The cost of such a search can vary from state to state and on the number of pages in the resulting search.
• Credit Checking Fees – only a few companies charge Credit Checking Fees and it’s simply a way to make more money.
• Success Fees – this is a fee that is negotiated between you and the lease/loan broker and generally represents his fee for finding you a lease or loan. It is generally dependent upon the amount of the asset cost and should normally range from 2% of the equipment cost for transactions over $500k to 5% of the equipment cost for transactions under $500k. Remember these fees are negotiable.
• Commitment Fees – this fee is given to a commercial lease or loan broker or lender to insure that you will accept and complete a lease or loan under a specific set of terms. This is generally accompanied by a Commitment Agreement which is a document that states the amount of the borrowing, the repayment terms, who will guaranty the obligation, and any contingencies. If the broker or lender performs and provides an approval in accordance with those terms and you decide not to proceed with the lease or loan the Commitment Fee will be retained. If you are not provided with an approval as detailed in the Commitment Agreement your fee should be returned. READ THESE DOCUEMTNS CAREFULLY.
• Titling Fees – these fees are usually reserved for the financing of titled vehicles. Amounts depend upon the type of vehicle and the state in which titling takes place
• Processing Fees – only a few companies charge Processing Fees and it’s simply a way to make more money.
• Miscellaneous Fees – which can be almost anything and it’s simply a way to make more money.
When applying for any lease or loan ask the lender to enumerate any and all fees or charges. Remember fees and charges are generally negotiable.
We offer this informational document as our opinion based on over 40 years of experience in the commercial finance industry and suggest that you to use it as a part of your decision making process. As with all important decisions, especially financial decisions, we also suggest that you consider all aspects carefully and consult with your attorney or accountant or other party who is knowledgeable about financial matters when considering entering into a legally binding agreement.