Commercial Line of Credit Fees: What to Expect
Fees are often the hidden cost in a commercial line of credit. While interest gets the most attention, fees — origination, draw, maintenance, and unused line charges — can add thousands of dollars to total cost, especially on facilities that are drawn frequently or held for multiple years.
Complete fee taxonomy
Not every lender charges every fee, and fee amounts vary significantly. Always request a full fee schedule and read the agreement before closing.
| Fee type | Typical amount | When charged |
|---|---|---|
| Origination fee | 0.5%–3% of credit limit | At closing |
| Draw fee | 0.5%–2% per draw | Each time you access funds |
| Annual maintenance fee | $150–$500+ | Each year the facility is open |
| Monthly maintenance fee | $25–$100/month | Monthly, regardless of draws |
| Unused line fee | 0.1%–0.5% annually on undrawn balance | Quarterly or annually |
| Prepayment fee | Varies; sometimes none | If you close the facility early |
| Late payment fee | Flat fee or % of payment | On missed or late payments |
Origination fees
An origination fee is charged at closing to cover the lender's cost of underwriting and setting up the facility. On a $200,000 line, a 2% origination fee means you pay $4,000 upfront — whether you draw the full amount or not. Some lenders waive origination fees; others charge them annually at renewal.
Draw fees
A draw fee is charged each time you access funds. At 1% on a $50,000 draw, you pay $500 every time you draw that amount. If you make 10 draws per year, the draw fees alone total $5,000 — significant relative to the interest cost on short-duration draws.
High-frequency draw patterns (weekly draws for cash flow management) can make draw fees the dominant cost component. Factor this into your cost comparison.
Unused line fees
Some lenders charge a fee on the undrawn portion of your credit line to offset the cost of keeping capital available. At 0.25% annually on a $200,000 line with $100,000 unused, the unused fee is $250 per year. This fee penalizes low utilization and should factor into your decision about credit limit sizing.
Fee-efficient borrowing practices
You can reduce total fee cost by choosing facilities with few or no draw fees, matching credit limit size to actual utilization (to minimize unused line fees), repaying draws quickly to reduce total interest, and comparing the full cost structure — not just the headline rate — across competing offers.
Frequently Asked Questions
- Are line of credit fees tax deductible?
- For business entities, financing fees and interest expenses are generally deductible business expenses. Consult your tax advisor for guidance specific to your situation and entity type.
- Can I get a line of credit with no fees?
- Some lenders, particularly credit unions and online lenders competing on simplicity, offer fee-free or low-fee structures. These often compensate with a higher interest rate or stricter eligibility. Always compare total cost across the full expected draw and repayment cycle.