Net proceeds is the amount of money a borrower actually receives after all fees, costs, and deductions are subtracted from the gross loan amount. For a $100,000 loan with a 3% origination fee, net proceeds are $97,000. Understanding net proceeds helps borrowers budget accurately — you may need to borrow more than your project cost to receive enough after fees.
When a lender approves a loan, the approved amount (gross) is not always what lands in your account. Origination fees, processing fees, broker fees, prepaid interest, and closing costs are commonly deducted before disbursement, reducing net proceeds below the face amount. For small business borrowers, this distinction is load-bearing when sizing a loan. If you need $90,000 for a project and there is a 3% origination fee plus $2,000 in closing costs, you need to borrow approximately $94,800 — not $90,000 — to walk away with the full amount needed. The SBA's borrower fee disclosures and standard loan agreements (https://www.sba.gov/document/support-sba-standard-operating-procedures) are required to disclose net disbursement amounts. Similarly, TILA disclosure requirements (Regulation Z) require lenders to disclose [[apr]] and total finance charge, which together let borrowers compute the true cost and net-proceeds gap. For MCAs and revenue-based financing, net proceeds can be further reduced by broker origination fees deducted at funding. Always confirm the wire amount before signing — don't compare gross amounts across lenders without checking what each deducts.
Two loans with the same face amount can have different net proceeds if one has higher origination fees. If you need a specific amount for your project, compare how much you actually receive — not just the loan amount and rate — when evaluating offers.
Not always. Some lenders add fees to the loan balance (you finance them) rather than deducting at closing. Both result in a higher total cost but affect cash flow differently — financing fees means you receive the full amount but owe more; deducting fees means you receive less but owe only the stated principal.