Line fee
What is a line fee on a business loan?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A line fee is charged on the whole limit of a facility — usually an overdraft or revolving line — whether or not the money is drawn: the price of the bank holding the funds available. It is easy to miss when comparing offers, because a lower margin with a higher line fee can cost more on a facility that is mostly undrawn; the honest comparison adds the two and re-expresses them against the balance the business actually expects to carry. A smaller limit is a smaller fee, which is the cheapest negotiation most borrowers never have.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// WHAT IT IS NOT
A line fee is not a commitment fee in the narrow sense: a line fee is charged on the whole limit, drawn or not, and a commitment fee on the undrawn part only. Facility letters use the two names loosely, so read what each is charged on.
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