Upfront bank costs for due diligence

by a searcher

2 years ago

Hi all, I have heard that banks will ask for an upfront payment to cover their due diligence costs. Is this true for all banks or only some? Is this negotiable? 

It makes me wonder what the point of hiring a great law  and accounting firm is, if we need to pay for QoE and dliligence, then the banks want want more money to cover their diligence. Thank you

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lender from The University of Chicago - Booth School of Business

Byline Bank, a major SBA lender, typically does not require a deposit until credit approval is obtained and a commitment letter is issued. Upon acceptance of the commitment, we ask for a deposit to cover the out-of-pocket legal and other expenses that will be incurred pending closing of the loan.

2 years ago | like reply | 1 like

searcher from IE Business School

I paid a $5k deposit when I signed the term sheet on an SBA loan. This was pretty typical across multiple banks that I had requested term sheets from. The $5k was nonrefundable to cover some of their costs if the deal didn't close, & it was applied to my fees at closing since I did close. I'm not sure if it's typical for non SBA deals, but it definitely seemed standard for SBA ones. Good luck!

2 years ago | like reply | 1 like

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