Loans Information

Luxury Real Estate Information


Rancho Palos Verdes, California Homes
Palos Verdes, California Homes
South Bay, California Homes
Luxury Mexican Beachfront Homes

Featured Properties


Oceanfront Estate Near Trump National

Related Information


Loan Information
Real Estate Information
Mortgage Refinance Information

Hidden Bank Loan Charges That Would Make a Pick-Pocket Envious


There can be more to a bank business loan than making interest and principal payments. Your firm may get a great rate on its new credit line or term loan but you may cry on the way home when you discover the hidden fees and charges.

Even seasoned borrowers can be caught off guard. Borrowing costs can be boosted by thousands of dollars and the effective rate on the loan increased by many basis points as a result of these hidden charges.

Here are some of the fees and charges that can increase your firm's costs on bank loans:

Commitment fees

Many banks charge commitment fees of % - 1% or more to issue a commitment to lend money. The fee is calculated on the available credit amount. Commitment fees significantly increase the effective rate on outstanding loans.

These fees can be negotiated. If your firm has a strong credit profile or if the competition among banks in your area is fierce, ask for a lower commitment fee or ask to have it waived.

Non-use fees

These fees may be charged in lieu of or in addition to commitment fees. Non-use fees usually range from % to % of the unused credit facility. Although these fees are less onerous than commitment fees, they also increase the effective borrowing rate.

As with a commitment fee, you may be able to get the non-use fee reduced or waived if your firm has a strong credit profile or if the banking environment is very competitive.

Restructuring fees

When your firm has reason to restructure an existing loan, you can expect your bank to charge a restructuring fee for the privilege. For example, if your company has reason to convert a short-term loan into a long-term one, it will probably be charged for this restructure.

These fees can range from % to 2% or more plus any bank legal fees or out-of-pocket expenses. If your firm has been a long-term bank customer in good standing, you may be able to negotiate or eliminate the fee. But don't expect to eliminate the bank's attorney fees and out-of-pocket expenses.

Bank attorney fees

Attorney fees usually come into play when the bank uses an outside law firm. Making matters worst, many outside bank attorneys require a borrower to hire an outside attorney to issue an opinion letter covering the transaction.

Usually, only the strongest borrowers in very competitive banking situations can totally eliminate paying bank attorney fees. However, if your firm is a valued customer, your bank may be willing to have these fees capped or reduced. Often banks have some leverage with their law firms to get a discount.

Appraisal/environmental evaluation fees

These fees are charged on many asset-backed loans. They usually involve bringing in an outside expert to evaluate equipment or real estate. These fees can be significant, depending on the type of appraisal or environment issue.

Like attorney fees, appraisal or environment evaluation fees are almost always for the account of the borrower. Perhaps the best result one can expect is to have these fees capped or have the lender split the amount in some way.

Unanticipated audit expense

Many banks reserve the right to audit borrowers or to send bank personnel in for inspections. An audit may be required to review accounting procedures or to monitor collections, inventory or another aspect of your firm's operation. Also, some banks require outside audits by CPA firms in connection with extending credit. Any of these scenarios can create significant expense and involve a substantial time commitment for your firm.

Before signing, review your loan agreement carefully to identify any audit or bank inspection requirement. If your bank requires an audit or inspection that you did not anticipate, try to get it eliminated or try to negotiate limits. You may be able to get a less-stringent requirement or to negotiate a less-expensive alternative to the audit or inspection required by your bank.

If all else fails, try to get audit or inspection fees capped.

Late charges

Charges for making late payments to your bank are generally in your control. These charges can be onerous and can add significantly to your firm's borrowing cost. It is not unusual to see banks tack 300 basis points onto a customer's borrowing rate for delinquent payments.

While it is worthwhile during the negotiating stage of the loan to ask for a lower late- payment charge, the best solution is to try to avoid these charges. If you can, try to get the late-payment rate knocked down to 75 to 150 basis points above your borrowing rate.

Expiry of or Failure to Get a Rate-lock

In a stable rate environment, many banks are willing to lock the rate on fixed-rate credit transactions. Rate-locks protect the borrower from adverse rate movements prior to closing. In most cases, rates can be held up to 60 days. Rate-locks are not uncommon in real estate loans and equipment installment loans.

If your firm is negotiating a fixed-rate loan, try to negotiate a rate-lock. You may pay loan interest that is a tad higher, but a locked rate can eliminate an unpleasant interest rate swing.

Once you have locked the rate, try to stay within the holding period for closing the transaction. Most banks will eagerly and aggressively pass on rate hikes in a rising rate market, if you fail to comply.

Many hidden bank fees and charges can be reduced or eliminated if you plan ahead and are prepared to negotiate. You are in your strongest negotiating position before your bank issues a commitment letter and before you sign the credit agreement. Always read commitment letters and loan agreements carefully. Look for hidden fees, hidden charges and unexpected requirements. You can also ask your bank to prepare a separate list highlighting all potential fees and charges.

George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. ("LTI"). He is responsible for overseeing the company's marketing and financing efforts. One of the co-founders of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing.

Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at http://www.ltileasing.com.


MORE RESOURCES:

New York Times

China's Economy Grew Steadily, Thanks to Loans and Homes
New York Times
Shoppers in Shanghai. Retail spending, housing sales and trade figures suggest an economy growing steadily under the guiding hand of the government. Credit Chandan Khanna/Agence France-Presse — Getty Images. BEIJING — China turned to a ...

and more »


Bloomberg

Greek Banks Face 'Gangs' in Bad-Loans Battle With Defaulters ...
Bloomberg
When Eurobank Ergasias SA, Greece's third-biggest lender, recently went after a “strategic defaulter,” angry protesters stormed the courtroom to block its ...

and more »


Lincoln Journal Star

Nelnet buys competitor in servicing student loans
Lincoln Journal Star
Noting that the two companies combined have more than 90 years of experience in the student loan industry, Noordhoek said they, "now have the opportunity to transform student loan servicing for millions of borrowers, providing a consistent and ...
Nelnet (NNI) to Acquire Great Lakes Educational Loan Services for $150 MillionStreetInsider.com

all 14 news articles »


CNBC

3 big things Americans get wrong about student loans
CNBC
Millennial Personal Finance polled 500 Americans with student loan debt who are currently in college or who graduated between 2014 and 2017. "We tested their basic knowledge on student loans by asking a few questions, and the results were uninspiring," ...



The Denver Post

Women who own businesses find bank loans harder to get
The Denver Post
In this Wednesday, Oct. 4, 2017, photo, Kirsten Curry, left, owner of Leading Retirement Solutions, laughs with Gene Skonetski, a client services manager, in their office in Seattle. Curry has applied to four banks for loans for the retirement planning ...

and more »


MarketWatch

What you need to know about the government's 'Game of Loans' operation
MarketWatch
The initiative, known as “Game of Loans,” includes cases, a judgment and other enforcement actions against several companies accused of illegally bilking millions of dollars from student loan borrowers looking for help managing their debt. MarketWatch ...
Advocates Praise Student Loan Scam Crackdown, Demand MoreNerdWallet (blog)
Major crackdown on student loan scammersKGUN
FTC, State Law Enforcement Partners Announce Nationwide Crackdown on Student Loan Debt Relief Scams | Federal ...Federal Trade Commission

all 27 news articles »


Inside Higher Ed

Black Grads Struggle to Repay Student Loans, New Data Show ...
Money Magazine
New government data show black graduates with bachelor's degrees are four times more likely to default on student loans than white grads.
Half of black student loan borrowers default, new federal data showInside Higher Ed
'Crisis' for African-American Student Loan Borrowers | Education ...U.S. News & World Report
New Federal Data Show a Student Loan Crisis for African American BorrowersCenter For American Progress

all 5 news articles »


U.S. News & World Report

Italian PM Says EU Bad Loan Measures Must Not Hamper Lending
U.S. News & World Report
BRUSSELS (Reuters) - Italy's Prime Minister will seek assurances from EU authorities that its banking system will not face "inappropriate measures" that hamper lending under stepped-up efforts to manage bad loans. The European Central Bank - which ...

and more »


LPC-Europe's lev market set for 7.6bn of LBO loans
Kitco News
LONDON, Oct 19 (Reuters) - Another wave of event driven financings is set to hit Europe's leveraged loan market in November promising at least 7.6bn-equivalent of new issuance for cash-rich investors before the end of the year. Two of the higher ...

and more »


Quartz

Student loans: Almost half of black university students will default ...
Quartz
College is usually seen as a golden ticket—get your degree, and you can launch into a life worthy of the American dream. In theory, young people take out loans ...
State says company took advantage of Pennsylvanians with student loansAllentown Morning Call
Half of All Black Student Borrowers Default on Their Student LoansBlack Enterprise
New Federal Data Show a Student Loan Crisis for African American ...Center For American Progress
ConsumerAffairs
all 13 news articles »

Google News

home | site map
TIGER MEDIA© 2006