Exit fee

An exit fee is a charge payable when a facility is repaid, either at its scheduled maturity or on early repayment, and is more common on short-term, private and specialist lending than on standard bank facilities. Where a facility carries an exit fee, borrowers should confirm whether it applies on early repayment as well as at scheduled maturity, since a facility that is repaid ahead of schedule, for instance once a sale settles sooner than planned, can still attract the fee in full depending on the loan terms. Exit fees are typically calculated as a percentage of the facility amount and disclosed in the loan offer alongside the interest rate and establishment fee, allowing the total cost of the facility to be assessed rather than just its headline rate. Because the exit fee is triggered by the same event as the exit strategy itself, it should be factored into the borrower's calculation of what needs to be realised at exit to clear the facility in full.

Related

Short-term business loans · Establishment fee · Exit strategy