Buyer beware: the fine print of small business loan fees

3 min read
Buyer beware

Business loan fees can have a big impact on the cost of borrowing. If you’re considering a small business loan, here’s a look at common loan fees and hidden costs to watch out for.

The saying “it’s all in the details” couldn’t be more apt than when it comes to understanding small business loan fees.

Before signing on the dotted line, it pays to be aware of various fees and costs that can be hidden in the fine print. QuickBooks Capital lets you know exactly what you’ll be paying up front so there are no surprises—just affordable interest rates based on your business and credit performance.

 We’ve listed common descriptions of a variety of typical loan fees and costs that financial institutions and lenders may charge you. Be aware since they add up and can impact your bottom line.

Loan fees to look for

  • Application fee: This fee is charged to cover the lender’s cost of reviewing and assessing your loan application, whether you’re approved or not.
  • Bank wire fee: The fee to wire transfer loan funds from the lender to your business bank account.
  • Check processing (or payment processing) fee: Some lenders offer the option of making loan payments by check instead of ACH (Automated Clearing House) transfer. This fee pays for the extra cost involved.
  • Draw fee: This fee, typically a percentage of the loan, is similar to an origination fee except it applies to lines of credit.
  • External transfer fee: This fee covers the cost of making an ACH transfer between banks.
  • Factor fee: A factor fee or factor rate is for the cost of a merchant cash advance, short-term loan and invoice financing.
  • Guaranty fee: A guaranty fee may be assessed on U.S. Small Business Administration loans above a certain amount. This fee is initially paid by the lending bank, which may pass those costs to you.
  • Insufficient fund fee: If your bank account has insufficient funds to cover your automatic loan payment, your lender will assess this fee, also called a bounce or unsuccessful payment fee.
  • Late payment fee: Missing a payment deadline can result in a late fee and can also affect your credit score.
  • Loan packaging fee: A lender may charge this fee for helping you organize financial documents and other information for the loan underwriter to review.
  • Origination fee: This fee, also called a closing fee, is charged to cover the lender’s administrative costs of processing and disbursing loan funds.
  • Referral fee: A referral fee is charged for connecting you to a loan that you get through an online lending platform.
  • Service fee: This fee covers record keeping, customer service, and other lender support over the life of the loan.
  • Underwriting fee: A fee collected by underwriters who verify and review all the loan information you’ve provided.

Watch for these costs

  • Closing costs: A bundle of all fees associated with processing your loan, such as origination, processing, referral and packaging fees, among others.
  • Servicing and maintenance costs: These monthly, quarterly, or yearly fees cover the costs of collecting payments, maintaining records, addressing delinquencies, and more.
  • Prepayment penalty: If you repay your loan in full early, lenders may charge a prepayment penalty to cover their lost profit. QuickBooks Capital doesn’t believe in prepayment penalties and allows borrowers to pay off their loans early to save on interest costs. (We also have no origination fees and no surprises—you only pay interest costs on our loans.). 

Business loan fees can have a big impact on the cost of borrowing, so don’t just skim the fine print. If you’re in the market for a small business loan, make sure you know and understand the terms before you commit to any loan or credit offer for your business. With QuickBooks Capital, you never have to worry about hidden fees and you’ll see the total cost of your loan up front—no origination fees, no prepayment penalties, and no surprises.

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