Guide · What it costs
What fees come with business funding besides the rate?
By Alex Makowski Updated
An origination fee, commonly a few percent of the amount and deducted before the money lands; sometimes an underwriting or processing fee, an ACH fee per debit, a late or returned-payment fee, and on some products a prepayment or early-termination charge. A broker's fee may be inside the origination fee or separate. On a $10,000 advance, $300 of fees is three percent of the cost before any factor applies, which is why fees matter more on small, short funding than the rate does.
In this guide
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01
The fees, one by one
Origination: the largest and most common, a percentage of the amount, taken off the top. You are approved for $50,000, the fee is 3 percent, $48,500 arrives, and you repay the factor on $50,000. Ask whether the factor applies to the gross or the net; it is nearly always the gross.
Underwriting or processing: a flat amount on some products, a few hundred dollars, sometimes waived on request.
ACH or payment fees: a small charge per debit on some advances, which over a hundred daily payments is not small.
Returned-payment and late fees: charged when a debit bounces, and a common trigger for a default notice.
Prepayment or early-termination: on interest-bearing products, sometimes a charge for repaying early; on factor products, the total is fixed anyway.
Broker fee: paid by the funder out of its margin on most deals, occasionally charged to you separately. Ask which. A fee charged to you before funding, to secure the funding, is the sign of a scam rather than a fee.
| Fee | What it is | Typically | Watch for |
|---|---|---|---|
| Origination | A percentage of the amount, taken off the top | A few percent; at 3%, $48,500 of a $50,000 approval arrives | Whether the factor applies to the gross or the net; it is nearly always the gross |
| Underwriting or processing | A flat fee on some products | A few hundred dollars | Sometimes waived if you ask |
| ACH or payment | A small charge per debit on some advances | Small per debit | Over a hundred daily payments it is not small |
| Returned-payment or late | Charged when a debit bounces | Set by the agreement | A common trigger for a default notice |
| Prepayment or early termination | A charge for repaying early on some interest-bearing products | On some products only | On a factor product the total is fixed anyway |
| Broker | Paid by the funder out of its margin on most deals | Occasionally charged to you separately; ask which | A fee you must pay before funding, to secure it, is the sign of a scam |
02
Why fees matter more on small amounts
$300 on $10,000 is 3 percent. $300 on $100,000 is nothing. The factor scales with the amount; most fees do not. For a small, short advance, the fees can be a third of the total cost, and an offer with a lower factor and higher fees can cost more than one with the reverse. Compare on total dollars repaid minus dollars received, with every fee inside the number.
Cost of $50,000, by product
03
Getting them in writing
Ask for the amount received, the total repayment, the term and every fee on one page before you sign. In a dozen states the funder must provide a standard disclosure that includes exactly that. Anywhere else, a funder that will not put the fees on paper is telling you what the fees are like.
Written by
Alex Makowski, Owner
Alex Makowski owns and runs Business Loans for America and has been placing funding for U.S. small businesses since 2021. Businesses he has worked with have secured $50M+ in financing across 1,200+ placements. He writes and reviews every guide on this site.
FAQ
Related questions.
- Is an origination fee negotiable?
- Sometimes, especially on a larger amount or a repeat customer. It is worth asking, and worth asking whether the factor can move instead — one of the two usually can.
- Are fees the same as points?
- Points are an origination fee expressed as a percentage; three points is a 3 percent fee. Same thing, older word.
- Do I get the fee back if I don't take the funding?
- You should never have paid one. Fees come out of the funded amount at closing. Any fee requested before funding, to process or secure the funding, is the advance-fee scam the FTC warns about.
Guides
More on what it costs
The daily payment, computed
Total repayment divided by business days in the term. $65,000 over 126 days is $516 a day.
$50,000, four ways
$15,000 on an advance over six months, or $12,000 to $17,000 on equipment spread over five years. Same money, different jobs.
Short term or long term
Longer usually costs more in total and less per week. The right answer is the longest term whose total you can stomach.
The price of equipment money
Close to bank pricing for a strong file, into the twenties for a startup or a low score. The machine is why.
Lower factor, not always cheaper
A 1.2 with high fees and a four-month term can cost more per month than a 1.3 over ten. Compare in dollars.
Worse than advertised
Files are graded A to D on deposits, balance and history. The advertised rate is the A grade. Most files are not A.
Sources
- FTC — Report FraudWhere to report advance-fee and business-funding scams.
- New York DFS — Commercial Finance Disclosure Law, 23 NYCRR 600The regulation itself, including the duties it places on brokers.
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