# Origination fee Source: https://businessloanbroker.ai/glossary/origination-fee/ Site: BusinessLoanBroker.ai (powered by Levr) > An origination fee is a one time charge taken from your loan amount at funding. See typical percentages by loan type and how it changes your real cost. An origination fee is a one time charge a lender takes from the loan amount to cover the cost of setting it up. It is usually a percentage, deducted before the money reaches your account, so you receive less than you borrow while still repaying the full amount. ## Key facts - **Also called:** Closing fee, setup fee, packaging fee, funding fee, points - **Where you will see it:** Term loans, SBA loans, online loans, cash advances, some lines of credit - **Why it matters:** It raises your real cost and APR, especially on short loans ## What is an origination fee? An origination fee pays the lender for underwriting, documenting and funding your loan. It is charged once, at funding, and almost always netted out of the proceeds rather than billed separately. A $100,000 loan with a 3% fee lands in your account as $97,000. Banks sometimes charge a flat amount instead. SBA lenders pass through an SBA guarantee fee set by the government, plus their own packaging fee. Cash advance providers often call it a funding or underwriting fee. Whatever the name, it belongs in your cost comparison, and it is the main reason [APR](https://businessloanbroker.ai/glossary/apr/) is higher than the quoted interest rate. ## How is an origination fee calculated? The fee is a percentage of the loan amount, taken out before you receive the money. - You are approved for $100,000 at 10% interest over three years with a 3% origination fee. - The fee is $3,000, so $97,000 arrives in your account. - Your payments are still based on $100,000, about $3,227 a month. - Because you pay interest on $3,000 you never received, the APR is roughly 12%, not 10%. If you need a full $100,000 in hand, ask the lender to gross up the loan to about $103,100 so you still net $100,000 after the fee. Our [business loan calculator](https://businessloanbroker.ai/tools/business-loan-calculator/) shows the payment either way. ## What do lenders consider normal? Origination fees typically run from 1% to 6% of the loan amount. Banks typically charge 0.5% to 2% or a flat fee. Online term lenders typically charge 2% to 6%. Cash advance providers typically charge 1% to 5% on top of the factor rate. SBA 7(a) loans carry a government guarantee fee that scales with loan size and a capped lender packaging fee. A fee at the high end is not automatically a bad deal if the rate is low and the term is long. A low fee on a loan you repay in four months can still be expensive. See [business loan rates explained](https://businessloanbroker.ai/guides/business-loan-rates-explained/) for how fees combine with rate. ## What should you watch for? Watch for any fee charged before funding. A real origination fee is deducted at funding. Anyone asking you to wire a fee first to release the loan is almost always running a scam, and our guide on [business loan scams](https://businessloanbroker.ai/guides/business-loan-scams/) explains the pattern. Watch for fees stacked under different names: origination, processing, underwriting, documentation and ACH setup on one loan. Add them all up. Watch for a fee charged again on renewal, since renewing a short term loan every few months can mean paying 5% four times a year. Ask for total fees in dollars on the term sheet. ## Related terms The origination fee is the main reason [APR](https://businessloanbroker.ai/glossary/apr/) sits above the stated rate, and on cash advances it stacks on top of the [factor rate](https://businessloanbroker.ai/glossary/factor-rate/). It should appear as a line item on every [term sheet](https://businessloanbroker.ai/glossary/term-sheet/). You will see the widest range on [short term loans](https://businessloanbroker.ai/business-loans/short-term-loans/) and the most structure on [SBA 7(a) loans](https://businessloanbroker.ai/business-loans/sba-7a-loans/). You can apply here, or ask your AI assistant to total the fees across your offers and apply for you through our [MCP server](https://businessloanbroker.ai/agents/). ## Questions and answers **Is an origination fee negotiable?** Sometimes. Banks and credit unions often reduce or waive it for strong borrowers or existing customers. Online lenders rarely move on the fee but may move on rate. It never hurts to ask with competing offers in hand. **Do I pay the origination fee upfront?** No. A legitimate origination fee is deducted from the loan proceeds at funding. Never pay a fee by wire, card or app before the loan is approved and funded. That request is the most common sign of a loan scam. **Is the SBA guarantee fee the same as an origination fee?** No. The SBA guarantee fee is set by the government, varies by loan size, and is waived on some smaller loans. Lenders may add a packaging fee. Both are usually financed into the loan rather than paid in cash. ## Related - [APR](https://businessloanbroker.ai/glossary/apr/) - [Business loan scams and how to avoid them](https://businessloanbroker.ai/guides/business-loan-scams/) - [Business loan rates explained](https://businessloanbroker.ai/guides/business-loan-rates-explained/) - [Business loan payment calculator](https://businessloanbroker.ai/tools/business-loan-calculator/) ## Apply Apply for the business: https://apply.businessloanbroker.ai/signup?utm_source=direct&utm_medium=organic&utm_content=md-origination-fee MCP server for AI agents: https://mcp.businessloanbroker.ai/mcp (docs: https://businessloanbroker.ai/agents/mcp/)