Non-usage fee
A non-usage fee (or unused line fee) is a charge on the part of a committed credit facility a borrower does not draw, compensating the provider for keeping that capacity available.
How a non-usage fee works
A provider that commits to a $10,000,000 line has to hold capital against the whole commitment, whether or not you use it. Many agreements recover that cost with a fee on the undrawn amount, usually stated as an annual percentage and calculated on average daily unused balance. Some facilities add a minimum usage requirement instead, charging interest as if a set share of the line were drawn.
It is one of several fees that sit on top of the interest rate. Others commonly include commitment or facility fees at signing and renewal, per-file transaction fees (one bank’s published program, for example, charges a per-file fee on each loan funded) and audit or custodial fees.
Why it matters to a private lender
Private lenders’ volume is uneven. A line sized for your best quarter can cost you fees in every slow one. When you compare a line with other funding, add the non-usage fee, the commitment fee and the cost of your haircut capital to the interest rate to get an all-in cost per dollar actually used.
Example
Hypothetical. A $10,000,000 line charges 0.50% a year on unused balance. If the lender averages $4,000,000 drawn, it pays about $30,000 a year (0.50% of $6,000,000) for capacity it did not use, before any interest.
Run your own numbers in the warehouse line cost calculator.
Where Lender Capital fits
Lender Capital places first-lien, business-purpose real estate loans with capital partners. You apply once, then submit each loan with the full file. We send it only to capital partners whose criteria it fits, one partner funds the whole loan at closing and it is assigned to them. You keep your points (less the placement fee), earn the spread above the partner’s rate and service the loan. You pay a placement fee only when a loan funds.
Lender Capital is a business-to-business platform. This page is general information, not legal, tax or securities advice. Terms of warehouse lines and other funding sources vary by provider; confirm them with each provider and your counsel.