Are there any upfront or arrangement fees from the lender or broker?

Short answer: yes, fees can apply — here’s how to spot them and avoid surprises

Most UK business lenders and brokers may charge fees, but reputable firms usually don’t ask for large, non‑refundable payments before they’ve issued a clear offer or completed essential due diligence. Typical costs include a lender arrangement fee payable on drawdown, and occasionally third‑party costs such as valuations or legal fees during underwriting. Brokers may be paid by the lender via commission, or may charge you a success‑based fee; either way, all fees should be disclosed clearly, in writing, before you commit.

BestBusinessLoans.ai does not provide loans and does not charge you a fee to use our platform. We introduce UK businesses to suitable providers and aim to ensure you understand the total cost of finance before you proceed.

This guide explains which fees are common, when they’re payable, what’s reasonable, and how to compare offers confidently and compliantly.

What counts as an “upfront” fee?

“Upfront” usually refers to any fee requested before a loan is offered or drawn down. It could be a broker retainer, a packaging fee, or a valuation/legal cost required to progress underwriting. Genuine third‑party costs are sometimes payable before completion, but they should be modest, documented, and linked to a clear next step.

Be cautious of sizeable non‑refundable fees requested before you receive Heads of Terms or a formal offer. If in doubt, ask the provider to put all charges and refund policies in writing.

Key principle: clear, fair, and not misleading

In line with the FCA’s “clear, fair and not misleading” standard, all material costs should be transparent and comprehensible. You should receive documents that explain fees, how and when they’re charged, and whether they are refundable if a deal does not complete.

If a fee is mandatory to proceed, you should be told what it covers, who receives it, and how it will be accounted for at completion.

Typical lender and broker fees in UK business finance

Fees vary by product, provider, and deal complexity, but most charges fall into recognisable categories. Understanding the landscape helps you benchmark what you’re being quoted.

Lender fees you may see

• Arrangement or facility fee: Common on term loans, asset finance, and revolving facilities. Often expressed as a percentage of the amount advanced, typically payable on drawdown. For some products this may be built into the total cost rather than a separate line item.
• Documentation or admin fee: A fixed fee for preparing the loan agreement and security documents. Usually modest and sometimes waived.
• Valuation, inspection, or audit fees: More likely where security is involved (e.g., equipment, vehicles, or ledger audits for invoice finance). These may be charged at cost and may be payable ahead of completion because the work is done by third parties.
• Legal fees: In complex or secured deals, you may be expected to contribute to the lender’s legal costs. These are typically quoted in advance and may be payable at completion or on account.
• Non‑utilisation or line fee (revolving credit): A fee on the unused portion of a facility limit, common in revolving or flexible lines.
• Exit or early repayment fees: Some agreements carry a minimum term or an early settlement charge. Always check the exit terms before signing.

Broker fees you may see

• Success fee: Payable only if the finance completes. This could be a fixed amount or a percentage of the funded sum.
• Lender‑paid commission: Many brokers are remunerated by the lender or packager, meaning no direct fee to you. This should still be disclosed.
• Packaging or arrangement fee (broker‑side): Sometimes charged for complex cases; should be success‑based or tied to clear deliverables.
• Retainer or upfront broker fee: Less common. Treat with caution unless the broker explains precisely what the fee covers and sets out refund terms.

Product‑specific notes

• Asset finance: Expect documentation fees and possible valuation or inspection costs for high‑value machinery or vehicles.
• Invoice finance: Common charges include a set‑up fee, ongoing service fee, and a discount rate on funds advanced; an initial audit may be chargeable.
• Merchant cash advance: Fees are embedded in the factor rate; there’s usually no separate arrangement fee but confirm any set‑up charges.
• Working capital loans: Arrangement fees and legal costs vary by lender. Always compare total cost of credit, not just the rate.

When fees are payable — and which ones are “upfront”

Understanding timing is as important as knowing the type of fee. Here’s the typical sequence you can expect in the UK market.

Before a formal offer

Reputable lenders and brokers rarely ask for a large payment at the initial enquiry stage. However, for secured or complex deals, legitimate third‑party costs may arise early — for example, valuations or audits — because providers must pay those suppliers to proceed.

Where an initial assessment fee is quoted, ask if it’s a pass‑through cost, who performs the work, and whether any unused portion is refunded if the deal doesn’t proceed.

On offer and completion

Arrangement fees are commonly deducted from the gross advance on drawdown, meaning you don’t have to transfer a separate payment. Legal fees, if applicable, may be paid directly to the firm handling the transaction or deducted at completion.

Broker success fees are typically invoiced when funds are released, or they may be settled by the lender from completion proceeds if agreed in writing.

During the life of the facility

Ongoing fees may apply, especially for facilities such as invoice finance or revolving credit. These can include service fees, audit/inspection fees, and non‑utilisation charges.

Exit fees or early settlement charges may apply if you repay before the minimum term. Check whether a notice period is required to terminate the facility.

Refunds and cancellations

If you pay for a valuation or legal work and then decide not to proceed, you’ll usually remain liable for incurred third‑party costs. If a broker has a success‑only fee, no fee should be due if there’s no completion, unless you’ve agreed to a specific retainer for defined work.

Always ask for the refund policy in writing and keep copies of all correspondence.

What’s reasonable — and what’s a red flag?

Every lender and broker sets its own fee structure, so precise “market ranges” vary. The best safeguard is transparency: are the fees itemised, explained, and linked to genuine work or risk?

Signs of a fair fee approach

• All fees are disclosed early, ideally in Heads of Terms or a term sheet.
• Arrangement fees are payable on completion or deducted from funds, not demanded without a clear offer.
• Third‑party fees are documented, with supplier names and scope of work.
• Broker remuneration is clearly explained — whether lender‑paid, success‑only, or both.

Potential red flags

• Large, non‑refundable payments requested before you receive any formal offer.
• Instructions to pay a personal bank account or a beneficiary whose details don’t match the firm.
• Refusal to provide written schedules of fees and refund terms.
• Pressure to pay immediately to “secure a rate” without documentation.

Comparing the total cost — not just the rate

Fees should be evaluated alongside interest or discount rates, term length, and any early repayment conditions. A slightly higher rate with lower fees and flexible exit terms may be cheaper over your intended holding period.

Ask for an illustration showing total cost of credit, including all known fees and the cost of early settlement if that’s likely.

Sector‑specific context

Different industries can face different due diligence costs. For example, hospitality operators may encounter refurbishment‑related valuations or equipment inspections for fit‑out finance.

If you run a hospitality venue, you may find our guide to sector funding useful: restaurant and hospitality business finance.

How to check, negotiate, and control fees

Follow a simple process to verify fees before you proceed. This helps you stay compliant with internal governance and reduces the risk of surprises.

Five steps to get fee‑clear, fast

1. Ask for a written fee summary: Request itemised lender and broker fees, timing, and payment method, plus any third‑party costs.
2. Confirm refund rules: If a deal aborts, which costs remain payable and why? Ask for the policy in writing.
3. Obtain a total cost illustration: Model interest, fees, and exit scenarios over the period you expect to keep the finance.
4. Compare at least two options: Fee structures differ; pick the route that fits your cash flow and risk profile.
5. Check who pays the broker: Clarify whether the broker is lender‑paid, borrower‑paid, or a mix, and how that affects your costs.

What to do if asked to pay a fee right now

Pause and request documentation. Ask specifically what the fee covers, who receives it, and how it will be refunded if the transaction doesn’t complete.

If anything seems unclear, seek independent advice from your accountant or legal adviser before transferring funds.

Negotiation tips

• Ask if arrangement or documentation fees can be reduced or waived, especially for repeat business.
• For valuations and legal work, ask for competitive quotes or a cap on costs.
• If an early repayment is likely, negotiate exit terms upfront or choose a facility with a shorter minimum term.

Compliance and record‑keeping

Keep all fee disclosures, Heads of Terms, emails, and invoices on file. This supports internal audit and strengthens your position if any dispute arises.

Ensure decision‑makers in your company approve any upfront third‑party spend before proceeding.

How Best Business Loans helps you achieve fee transparency

BestBusinessLoans.ai is an independent introducer. We don’t offer loans or handle client money, and it’s free to submit your Quick Quote on our platform.

We connect established UK businesses with suitable lenders or brokers and encourage clear, written disclosure of all fees, payment timings, and refund policies before you commit.

Our approach to clarity and fairness

• Upfront transparency: We encourage providers to share itemised fees and total cost illustrations early in the process.
• No obligation: Enquiries are free and non‑binding; you decide if an offer suits your goals and cash flow.
• Reputable network: We work with providers who are active in UK business finance and who align with fair‑dealing standards.

FAQs at a glance

Do lenders charge upfront fees? Some legitimate third‑party costs, such as valuations or audits, may be payable before completion. Arrangement fees are commonly charged on drawdown, not before a formal offer.

Do brokers charge upfront fees? Many are paid by the lender or charge a success‑only fee. Treat requests for large, non‑refundable retainers with caution and insist on written terms.

Are fees refundable if a deal falls through? Third‑party costs already incurred are usually non‑refundable, but success‑only broker fees should not be due if there’s no completion.

Are fees plus VAT? Some fees attract VAT and others do not. Ask for clarity on VAT treatment and how it will appear on your invoice.

How can I avoid hidden costs? Request a full fee schedule, confirm exit terms, and compare total cost of credit across options before you sign.

Get matched and check your eligibility

It takes minutes to complete a Quick Quote. Our AI‑enabled process connects you with relevant providers and helps you get the fee clarity you need before making a decision.

Start now to explore options for cash flow, asset finance, equipment, vehicles, invoice finance, and more — with no obligation.

Important information and compliance note

This article provides general information for UK businesses and is not financial or legal advice. BestBusinessLoans.ai is not a lender or broker and does not provide consumer credit services.

We aim to align with UK best practice so that any finance options introduced are presented in a manner that is clear, fair and not misleading. Always read your documents carefully and seek independent advice where appropriate.

Updated

Updated October 2025. Fees, eligibility, and policies can change. Always verify current terms with the provider.

Ready to check fees and eligibility?

Submit a Quick Quote for a no‑obligation introduction to suitable providers. It’s fast, secure, and free to enquire.

Key takeaways

• Most business finance solutions carry some fees; reputable providers disclose them clearly.
• Arrangement fees typically apply on drawdown; third‑party costs may be payable earlier for valuations or legal work.
• Brokers may be paid by the lender or charge a success‑based fee; insist on written terms either way.
• Compare total cost of credit, including fees and exit charges, not just the rate.
• BestBusinessLoans.ai is free to use and helps you reach providers who prioritise fee transparency.