Stage 4: Closing
With the commitment letter signed, the borrower pays the upfront deposits outlined in the letter. These cover administrative costs and the expense of third-party reports that need to be completed before closing.
The total amount varies depending on the loan and which reports are required, but borrowers should generally expect to pay several thousand dollars at this stage. In most cases, these costs are folded into the loan amount at closing, and any excess deposit is credited back to the borrower.
At this point, the loan also transitions from the lender’s underwriting department to their closing team. The borrower’s primary contact shifts to the assigned loan closer, who will manage the remaining steps through to funding.
Common Deposits
The specific deposits depend on the lender and the deal, but most B&I borrowers can expect to pay for the following:
• Lender Fees
B&I lenders may charge reasonable and customary fees for packaging and processing the loan application. These vary by lender – some charge a flat fee, others charge a percentage of the loan amount. The USDA does not set a specific amount, so this is worth discussing with your lender during the pre-qualification stage.
• Third Party Report Costs ($500-$15,000)
The borrower covers the cost of independent reports the lender orders as part of the closing process. Common reports and their typical cost ranges include commercial real estate appraisals ($4,000–$8,000, with most falling around $5,000), business valuations ($500–$3,000 when required separately from the appraisal), and Phase I environmental site assessments ($2,000–$2,500, with Phase II assessments running $3,000–$4,500 or more if triggered by Phase I findings). The exact reports required depend on the nature of the loan and the collateral involved.
Loan Fees Not Paid Now
• USDA Guaranty Fee (3% of Loan Amount)
The USDA charges a one-time guarantee fee based on the guaranteed portion of the loan. The guarantee percentage depends on loan size: 85% for loans under $5 million and 80% for loans of $5 million or more. The fee is 3% of the guaranteed amount.
For example, on a $3 million loan with an 85% guarantee, the guaranteed amount is $2,550,000 and the guarantee fee would be $76,500 (3% of $2,550,000). This fee is not paid out of pocket, but is instead added to the loan balance and paid at closing.
• Annual Renewal Fee (0.55% of Guaranteed Outstanding Balance)
In addition to the one-time guarantee fee, the USDA charges an annual renewal fee to maintain the guarantee. The current rate is 0.55% of the guaranteed portion of the outstanding principal balance, calculated as of December 31 each year. This fee decreases over time as the loan is paid down.
The USDA charges this fee to the lender, who typically passes it through to the borrower via their loan payments. The rate in effect at the time your loan is approved is locked in for the life of the loan, even if the USDA changes the rate in future years.
