Glossary definition
Commitment Fee
A fee charged by the lender on the undrawn portion of a committed loan facility, compensating the lender for reserving capital that the borrower has not yet utilised. Commitment fees on development finance facilities are typically 1–2% per annum of the undrawn balance.
Definition
A fee charged by the lender on the undrawn portion of a committed loan facility, compensating the lender for reserving capital that the borrower has not yet utilised. Commitment fees on development finance facilities are typically 1–2% per annum of the undrawn balance. This charge incentivises borrowers to draw down funds in line with their build programme and should be factored into the overall cost of borrowing alongside arrangement and exit fees.
See also
Closely related terms.
Arrangement Fee
A fee charged by the lender for setting up a loan facility, typically expressed as a percentage of the gross loan amount.
Non-Utilisation Fee
A fee charged by the lender on the committed but undrawn portion of a loan facility, incentivising the borrower to draw down funds in line with the agreed build programme.
Drawdown
The staged release of loan funds during a development project, triggered by the completion of pre-agreed construction milestones.
Facility Agreement
The legal contract between a borrower and a lender that sets out all terms and conditions of the loan including the facility amount, interest rate, drawdown mechanics, repayment terms, covenants, and events of default.
Further reading
Guides that touch this term.
Guide
Hidden Arrangement Fees in Development Finance: What Lenders Don't Tell You
Arrangement fees in development finance are rarely as straightforward as a single percentage. This guide exposes the hidden layers of fees that lenders charge and shows you how to negotiate effectively.
9 min read readReadGuide
How Does Development Finance Work? A Complete Guide for UK Developers
A ground-up guide to how development finance is structured in the UK, covering loan mechanics, drawdown schedules, monitoring surveyors, and what lenders look for in your application.
5 min read readReadGuide
The Capital Stack in Property Development: How to Structure Your Funding
A comprehensive guide to understanding and structuring the capital stack in UK property development, from senior debt through mezzanine to equity contributions.
9 min read readRead
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