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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Utilisation fee

What is a utilisation fee on a revolving credit facility?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A utilisation fee is an extra charge on a revolving credit facility, paid on the amount drawn, that applies once drawings pass set shares of the total commitments, commonly one-third and two-thirds, and rises at each step. It compensates lenders who priced the facility expecting it to stay largely undrawn. On a US$100 million facility charging 0.10% on everything drawn once drawings pass one-third, and 0.20% once they pass two-thirds, drawing US$80 million costs US$160,000 a year in utilisation fees on top of the margin. A borrower that expects to stay heavily drawn compares the all-in cost with a term loan's.

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 commitment fee is charged on the undrawn part of a facility; a utilisation fee is charged on the drawn part once drawings pass a threshold. One facility can carry both.

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