The headline rate isn't the whole rate. Here's the list of fees that quietly inflate the cost of small business financing.
Every small business financing offer has a headline number — APR, factor rate, monthly payment. The headline is real, but it's almost never the whole cost. Fees stacked into the contract can add 3-10% to the effective cost of capital. Here's the complete list and how to negotiate them.
Charged at funding, deducted from the amount you receive. Typical: 1-5% of the loan amount. A $100k loan with a 3% origination fee deposits $97k but accrues interest on the full $100k. That alone can add 1.5-3% to the effective APR depending on the term.
Negotiable: yes, especially on larger loans. Always ask if it can be reduced or waived.
Often $250-1,500 flat. Real on bank loans where there's actual closing work; suspicious on online MCAs where there's effectively none. If the only "closing" is a DocuSign, the fee is a markup.
Some lenders charge $5-20 per ACH debit. With daily debits over a 6-month MCA, that's $600-2,400 in pure fee. Always ask whether ACH/wire fees apply to repayment debits, not just funding.
Standard, but the ranges vary widely. Late fees of 5% of the missed payment are common. NSF (returned payment) fees of $25-75 per occurrence add up fast if your account hits zero on a debit day. Read the contract for the specific dollar amounts.
Some term loans charge 1-5% of the remaining balance if you pay off early. Some MCAs require the full factor amount regardless of when you pay. Always confirm prepayment treatment in writing — "discount for early payoff," "no change," or "penalty" should be explicit.
If you're working with a broker, ask whether they're being paid by the lender (most common — built into the offer rate) or by you directly. Direct broker fees of 2–5% are real but should be transparent. Hidden double-dipping (broker takes commission from lender AND fees from you) is the predatory pattern. If a broker asks you to pay them directly in addition to your loan terms, ask why and read the fine print before signing anything.
Some lenders charge a monthly $25-100 servicing fee on top of payments. Common on lines of credit. Negotiable, especially on larger draws.
$50-200 to file the UCC-1 lien against your business. Standard, not negotiable. Just know it's there.
On renewable products like lines of credit, some lenders charge an annual fee ($100-500) plus an underwriting fee at renewal. Read the contract before assuming the line is "free" to keep open.
The headline rate is the marketing. The all-in cost is the truth. Always insist on the all-in number — and walk away from any lender who can't or won't provide it. The FTC and CFPB both publish guidance on your rights around financing disclosures. For more on predatory patterns, see 5 signs of a predatory lender and Why stacking loans can destroy your business.
A fee charged at funding and typically deducted from the amount you receive. Typical range: 1-5% of the loan amount. A $100K loan with a 3% origination fee deposits $97K but accrues interest on the full $100K. That alone can add 1.5-3% to the effective APR depending on the term. Origination fees are often negotiable, especially on larger loans.
Sometimes. Some term loans charge 1-5% of the remaining balance for early payoff; some MCAs require the full factor amount regardless of when you pay; some products offer prepayment discounts. Always confirm prepayment treatment in writing before signing — 'discount,' 'no change,' or 'penalty' should be explicit. If the lender refuses to specify, walk.
Ask explicitly for the total dollar cost of capital, all-in, including every fee. Request an itemized fee schedule in writing. Request an APR-equivalent that includes all fees, not just the interest rate. Read the entire contract — fees often hide in addenda and definitions. Compare two written offers side-by-side; anything in one that isn't in the other is worth asking about.
Because TILA (Truth in Lending Act), which requires APR and total finance charge disclosures for consumer credit, does NOT cover small business loans. SMB lenders are not legally required to disclose all-in cost the way consumer lenders are. California, New York, Virginia, Utah, and Georgia have enacted state-level commercial financing disclosure laws (CFDLs), but most states have not.
Sometimes. If a broker is paid by the lender (most common — built into the offer rate), there's nothing to negotiate on your side. If a broker charges YOU directly on top of the loan terms, ask why and read the fine print. Direct broker fees of 2-5% are real but should be transparent. Hidden double-dipping (broker takes commission from lender AND fees from you) is the predatory pattern.
MCAs typically embed the entire cost in the factor rate, but watch for additional fees: ACH or wire fees on each daily debit ($5-$20 per — adds up over a 6-month MCA), origination fees (1-5% of funded amount, often deducted from disbursement), UCC filing fees ($50-$200, standard), and renewal/re-underwriting fees on second advances. Always ask whether ACH fees apply to repayment debits, not just funding.