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Closing costs
Also called closing fees, settlement costs, fees at funding.
Everything deducted or payable at funding beyond the financing cost itself, from origination and documentation fees to third-party charges and government filing fees.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
The list varies by product. On an advance or working capital loan it is typically an origination or underwriting fee, sometimes a documentation or ACH set-up fee, and a UCC filing fee. On an SBA or bank loan it is longer: an SBA guaranty fee based on loan size and term and set by the agency, lender packaging fees, appraisal, business valuation, environmental review, title insurance and recording, lien searches, legal fees and closing agent charges. On equipment finance, a documentation fee, first and last payments in advance, freight, delivery and sales tax.
Two questions decide what these actually cost you. Are they netted from proceeds or paid separately, and are they payable if the deal does not close. Netted fees are financed: you repay them and you pay the financing cost on them. Third-party costs are usually payable regardless of outcome, because the appraiser has done the work.
Government fees are the one part nobody controls. UCC filing fees, recording fees and the SBA guaranty fee are set externally and are not negotiable, though who pays them sometimes is.
Ask for the itemized list before signing, and ask for the net wire figure. If a provider will not put the net figure in writing, that is the answer to a different question.
Where this one catches people
Netting fees out of the funded amount is presented as convenience and is really a second price increase. You receive less and repay on more. A 100,000 advance with 6,000 of netted fees delivers 94,000 while payback is calculated on 100,000, so the effective cost of the money you actually got is higher than any rate you were quoted.
Worked through
SBA 7(a) closing: guaranty fee set by the agency on the guaranteed portion, plus 2,500 packaging, 3,000 appraisal, 1,800 environmental, 1,200 title and recording, 2,000 lender counsel. Financing the total into the loan means paying interest on it for the full amortization, which can double its real cost over a ten-year term.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Closing costs — common questions
What does closing costs mean?
Everything deducted or payable at funding beyond the financing cost itself, from origination and documentation fees to third-party charges and government filing fees.
Where does closing costs catch people out?
Netting fees out of the funded amount is presented as convenience and is really a second price increase. You receive less and repay on more. A 100,000 advance with 6,000 of netted fees delivers 94,000 while payback is calculated on 100,000, so the effective cost of the money you actually got is higher than any rate you were quoted.
Is closing costs the same as an interest rate?
Closing costs is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does closing costs apply to?
Merchant Cash Advance, Working Capital, Term Loan, SBA Loan, Equipment Financing, Asset-Based Lending.
Is there a worked example of closing costs?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside closing costs?
Amount funded, Annual percentage rate, Application fee, Commitment letter, Origination fee.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.