Commercial loans offered by private funding sources are more flexible and less regulated than conventional business loans. It is also a more complicated process than getting working capital for your small business. You, the loan seeker, are asking lenders/investors to risk their money on your project. The lenders/investors expect you to come into the transaction with a strong financial statement, experience in the related business and collateral to secure the loan.
We understand how you feel.
There is an understandable reluctance to paying so-called up-front fees. In fact, we always warn our clients to be extremely careful about paying fees before they get the loan. An up-front fee is a payment that is requested by a lender or loan broker with a promise that you will get the loan. No lender or broker can guarantee that you will get the loan until the due diligence is performed and all details are known about your loan proposal. If a lender or broker tells you that you will get the loan when they have only seen your loan proposal or executive summary, it is most likely a setup for an Advance Fee Scam. You will not get the loan once the fee is paid. This is illegal in most countries, but still many dishonest people do it and many loan seekers are cheated out of substantial sums of money.
Why are due diligence fees necessary?
All up-front fees are not advance fee scams. Some are legitimate costs incurred in processing your loan application. You must be realistic here. It will cost money for a lender/investor to thoroughly evaluate your commercial loan proposal. The lenders/investors are not going to pay these costs for you. You, the loan seeker, are expected to be financially capable to pay any due diligence costs incurred, in order for the lending process to continue.
Why can't the due diligence fees be paid at the close of the loan?
The investigation and evaluation of your loan application may often require travel to your project site, meetings, appraisals, permits, legal fees, background checks, etc. Third parties, such as appraisers, accountants, architects, consultants, engineers, lawyers, surveyors, and government officials are needed to accomplish these tasks. Each one of these professionals has to be paid for their work at the time the work is completed. Look at it from the lender/investors' perspective. If they review hundreds of loan proposals each year and the cost of evaluating those proposals range from $15,000 - $50,000 per loan proposal, you can see that bearing those costs could not be sustained by any lender/investor.
Here is the bottom line of commercial, large project and international lending:
If you are serious about getting funding for your project, you must be willing and able to pay the due diligence fees for the evaluation of your loan proposal. The good news is that we won’t ever accept payment of these due diligence fees unless you are 100% confident and comfortable with us and that we are more than reasonably sure that your project is one our lenders/investors will fund. Be assured that when our lenders/investors are interested in your project, they also have the time and money for your project and they will issue you a Letter-of-Intent (LOI), which spells out the terms and conditions under which you will be awarded the loan.
What is the Difference Between Up-Front Fees and Legitimate Processing Costs?