Glossary
Deal economics
What is upfront fee?
One-off fee taken at closing.
Cash today rather than yield over time. Useful when you doubt the asset will stay outstanding long enough for the spread to matter, and expensive for the borrower's own returns.
A worked example
A 2% fee on a $100m loan is $2m, paid at closing. If the borrower refinances after two years, that fee is worth about 1% a year to you. If the loan runs five years, it's closer to 0.4%.
Where it catches you in the game
- Fees pay into cash immediately but are the first thing a borrower pushes back on.
It comes up most on the private credit desk.
Related terms
Learn it by using it
Definitions stick once they've cost you money. Take a seat, make three calls a year and watch what upfront fee does to your returns.