How Much Do Business Loans Cost?
Recently we discussed the documents you’ll need to provide when applying for a loan. But you may be wondering how much a business loan could cost. So, we’re here to help! This blog post will break down some typical costs and fees associated with business loans but be sure to talk to your lender for a total fee breakdown.
Origination Fees: An origination fee is a charge assessed by the lender for processing a loan. This fee is generally a percentage of the total loan amount and is paid at closing. For example, if you’re taking out a $10,000 loan with a 4% origination fee, you would owe the lender $400 at closing.
Origination fees can vary widely depending on the type of loan, the lender, and your credit history. They typically range from 1% to 5% of the total loan amount, but they can sometimes be even higher. So, it’s essential to talk with your lender for more information.
Credit Report Fee: This fee is often listed separately from the origination fee. Your lender may have to run your credit report more than once during the loan application process to make sure your financial situation has stayed the same. You should plan to pay around $10 to $100 per credit report for each person who has applied for the loan.
Document Preparation Fee: Since a substantial amount of work goes into preparing for a loan, this may be an additional fee separate from the origination . This fee may vary depending on your loan size. For example, your bank may have a flat fee, or they may tiered fees depending on the size of your commercial loan.
Closing Costs: Closing costs are fees charged at the closing of your loan by the lender. These include appraisal fees, title insurance, and legal fees. Like origination fees, closing costs can vary depending on the type of loan and the lender. They typically range from 2% to 6% of the total loan amount but can be higher in some cases.
Annual Fees: Annual fees are in place to cover the cost of your loan’s upkeep, paid once a year. This fee can vary depending on your loan type.
Commercial Appraisal: If you are applying for a loan that requires a commercial appraisal, it could cost, on average, $4,000.
You can view the current online fee schedule here: https://www.dol.wa.gov/business/UCC/uccefees.html
Collateral Release Fee: Depending on the type of collateral you put up for your loan, you may be charged a fee when you pay off your loan or if you sell the listed collateral. If this fee is applied, it could be used for additional UCC Filing documents or a title transfer.
Other Costs: In addition to origination and closing fees, there may be additional costs that you should be aware of when taking out a business loan. These can include things like prepayment penalties and late payment fees. While these fees are only sometimes charged, you must ask your lender about them upfront so that you’re not surprised later down the road.
By understanding the different types of fees associated with loans, you can ensure you’re getting the best possible deal for your business. So, make sure you’re asking your lender as many questions as you need!