Origination fee

An origination fee is a charge made at the start of a loan for setting it up. Read the term sheet for every amount due at closing, whatever it is called, not only one with this name. A buyer meets it when financing a purchase. The CSBFP explained for buyers covers the federal program in more depth.

How the federal program treats lender charges

Under the Canada Small Business Financing Regulations, s.13(1), a lender may require the borrower to pay, in addition to the registration fee in section 11 of the Act, a charge it would make for taking security on a conventional loan of the same amount, subject to the rule in s.13(2) on charges expressed as a percentage of the loan. Paragraph (d) adds, for a loan made after March 31, 2014, any other charge it would make on a conventional loan of the same amount. The Guidelines, item 6.3, say the lender can request fees and charges that are equal to or less than the amount typically charged for similar conventional loans or lines of credit, and list fees related to the approval and renewal of a term loan or line of credit among them. The registration fee is a separate charge: see CSBFP registration fee.

What to check or ask

• Which fees are payable at or before closing, and what does each pay for?
• Are any of them refundable if the loan does not close?
• Is the fee in the quoted rate or charged on top of it?
• BDC’s small business loan page lists no application or prepayment fees for one option and says certain fees apply to the other, so compare lenders and products line by line.