Upfront fee

From Reuters Financial Glossary

The fee paid by a borrower to the banks for making the loan. The fee is often tiered, with the agent (or agents) receiving a larger amount in consideration of structuring the loan and/or underwriting larger amounts, thereby assuming greater risk.

Upfront fees paid to syndicate members are almost always a function of commitment size. Sometimes upfront fees will be structured as a percent of commitment plus a flat fee. For instance, an upfront fee of 100 basis points (or 1%) plus $50,000 flat. In this case, the flat fee is fixed, but the balance is a percent of the bank's ultimate allocation after the loan is syndicated. For example: a bank commits $100 million to a $1 billion credit. But, if the agent receives $2 billion in commitments the bank?s final allocation may total only $50 million. In this case, the upfront fees remain at $50,000 plus 1% of the $50 million final allocation.