Arrangement Fee

An arrangement fee (also called an origination fee or facility fee) is charged by the lender for the administrative and credit assessment work involved in setting up a finance facility. It is typically expressed as a percentage of the loan amount (1-3% for most business loans) or as a fixed fee for smaller facilities.

For commercial mortgages and secured business loans, arrangement fees can be added to the loan amount or paid upfront. Adding the fee to the loan means you pay interest on it for the life of the loan, increasing the true cost. Paying upfront reduces the total interest but requires more capital at outset.

Arrangement fees must be disclosed in the APR calculation for regulated products. For unregulated business finance (common for commercial properties and bridging loans), always ask for the fee schedule upfront and factor it into your total cost calculation.

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