Negotiating closing costs and junk fees on a business loan

Business loan closing costs fall into three groups: the lender's main fee, usually origination; real third party and government costs, such as UCC filings, lien searches and inspections; and extra lender fees with names like documentation, underwriting, processing or administration. The first group is negotiable, the second should be charged at actual cost, and the third is where most padding lives. Ask your broker for an itemised list before you sign and push back line by line.

Fees are a normal part of lending. Lenders do real work at closing, and a fair fee pays for it. The goal here is simply to pay for that work once.

The fee map

Why the extra lender fees are padding

NerdWallet describes the origination fee as covering the lender's own work on the loan: checking credit, reviewing tax returns and handling paperwork. When an offer charges origination and then adds a documentation fee, an underwriting fee and a processing fee, it is charging for the same work three or four times.

That does not make the lender bad. Fee schedules are often built in layers by different teams over the years. It does make those lines the easiest ones to ask your broker to remove, because the lender knows they are margin, not cost.

Pass through costs should be at cost

Some fees are real costs the lender pays someone else. The fair rule is that they pass through with no markup. SBA 7(a) lenders are held to exactly this standard: Starfield and Smith notes that filing, search, recording and overnight delivery charges can be passed to the borrower, but "you cannot add a markup to these costs." It is a sensible benchmark for every lender.

The gap can be large. Texas charges $5 to file an initial UCC-1 financing statement, and since August 29, 2025 all filings go through the state's online portal. A "UCC filing fee" of $250 on a Texas deal is $245 of margin.

A worked example: a $250,000 equipment loan

A construction company is financing a $250,000 excavator through a nonbank equipment lender. The broker forwards the lender's closing statement:

Two more questions change the picture:

• Are the fees withheld from proceeds or added to the loan? If they are financed, you pay interest on them for the full term.
• Is the rate fixed if the fees come down? Some lenders recover a fee cut through a higher rate. Ask your broker to confirm the rate and payment did not move.

SBA loans: know what is prohibited

SBA 7(a) loans have firm rules, which makes them easy to check. According to Starfield and Smith, lenders may not charge origination fees, points, "bonus points," renewal fees or lender prepayment penalties. They may charge the SBA guaranty fee, reasonable packaging fees disclosed on SBA Form 159, documented legal fees and third party costs at actual cost.

The guaranty fee is set by the SBA, not the lender. For fiscal year 2026 it is 2% of the guaranteed portion on loans of $150,000 or less and 3% from $150,001 to $700,000, with higher tiers above that. Manufacturers with loans of $950,000 or less pay 0%. Check that your loan is in the right tier and, if you are a manufacturer, that the waiver is applied.

Merchant cash advances: check the disbursement

On an advance, fees are usually taken out of the funding before it reaches you. The FTC alleged that Yellowstone Capital showed businesses a funding amount that left out fees later deducted, fees that "totaled hundreds and even thousands of dollars." Compare three numbers: the advance amount, the fees listed, and the amount that actually lands in your account. They should reconcile to the dollar.

The request to your broker

Send it by email so the broker can forward it:

"Before we sign, please ask the lender to: remove the underwriting fee, since origination covers underwriting; cap the documentation fee at $195; charge the UCC filing and wire at actual cost; and confirm the lien search and inspection with the vendors' invoices. Please also confirm the rate and payment stay the same."

Specific requests get specific answers. A lender will often agree to most of them on a good file, and your broker knows which lines each lender tends to move.

When to stop pushing

Once the padding is out, stop. Real costs, a fair origination fee and the SBA's own fees are what lending costs. Pushing past them risks the rate, the approval or the goodwill you will want at renewal. Your broker can tell you when you have reached that point.

Ask for the fee list early

The best time to see closing costs is with the offer, not at the closing table. Ask your broker to request an itemised fee schedule with every offer, and compare offers on total cost, not rate alone. Verified entries on the register show broker fees in writing, and brokers who place term loans every week know which lenders keep closing costs clean.