Anonymised, illustrative composite. Nothing here was disputed, nobody breached anything, and the fee line in the model was still out by $6,000 across the first five years.
At a glance
The target cleaned twenty-eight commercial buildings under contracts of one to three years, with fifty-one staff and six vans. The buyer was a facilities-management operator consolidating small contractors. Price $760,000 on an asset basis: equipment and vehicles $250,000; leasehold improvements $80,000; contracts, brand and customer relationships $150,000; inventory, prepaid items and working capital $280,000. The financing was two facilities — a $480,000 term loan, its $150,000 intangibles allocation exactly at the nested maximum, and a line of credit authorised at $150,000, the maximum for that class, to carry the payroll cycle against thirty- to sixty-day customer terms.
The buyer’s model had a single line: CSBFP registration fee 2%, $9,600. It was not a careless model — it is exactly what the programme’s own public guidance says. The department’s frequently asked questions state that “The CSBFP registration fee is 2% of the total amount of the loan.” which is a true and complete description of a deal with one facility. This deal had two, and the fee provision is written per class. The cash cost at closing was $12,600, and by the time the line was renewed in year five the running total was $15,600.
Fee one: 2% of the $480,000 term loan, $9,600. Fee two: 2% of the line of credit — and the base is the authorised amount, not the drawn amount. $150,000 authorised, so $3,000, payable whether or not a dollar is ever drawn. The peak draw in year one was $46,000, on which the fee would have been $920. The buyer paid $3,000 for headroom.
Fee three: the line was renewed for a further five-year term shortly before its fifth anniversary, triggering a further 2% of the renewed authorised amount — another $3,000. A fourth trigger this deal did not use: an agreed increase attracts 2% of the increase, so going from $150,000 to $200,000 mid-term would cost $1,000. Against a model carrying $9,600, the first five years and one renewal cost $15,600 — not a penalty or a surprise, just what section 4 says read class by class.
There is also a fee the borrower does not pay directly and should still understand. The lender owes the Minister an annual administration fee — not 2% but 1.25%, payable quarterly on the balances — and the Act provides that “The lender may not charge the borrower for that fee otherwise than through the imposition of interest in respect of the loan.” It sits inside the rate ceiling rather than on top of it. A file the lender could not price for the risk works through that constraint.
Section 4(1) of the Regulations, marginal note Fees, sets the registration fee in two paragraphs rather than one. For a term loan in any of the classes in paragraphs 5(1)(a) to (d) it is “2% of the amount of the loan”. For a line of credit under paragraph 5(1)(e) it is “2% of the authorized amount of the line of credit”. Two facilities, two paragraphs, two fees. Subsection (1.1) adds that where the parties renew a line of credit within five years of its opening “the lender must pay an additional registration fee of 2% of the renewed authorized amount”, and subsection (1.2) that on an agreed increase in the authorised amount “the lender must pay a registration fee of 2% of the increase in the authorized amount”.
The renewal fee is not optional if the line is to continue: section 10(6)(a) offers the choice to “submit a new registration under section 2 for an additional five year term, along with the registration fee under subsection 4(1.1)” — the fee is written into the renewal route itself.
Now the useful part. The fee is its own class of loan. Paragraph 5(1)(f) makes eligible “loans to finance the payment by the borrower of registration fees payable in respect of a loan referred to in any of paragraphs (a) to (e)”, so the $12,600 payable at closing could be borrowed rather than found in cash, which the department confirms: “The registration fee can be financed as part of the loan.” And it does not regress: section 4(1) charges a fee only on loans in paragraphs 5(1)(a) to (d) and on lines of credit under 5(1)(e), and a paragraph 5(1)(f) loan appears in neither list. There is no fee on the fee. Its term tracks the class it relates to under section 6(2) — fifteen years for a term-loan fee, five for a line-of-credit fee.
One thing the Regulations do not say plainly, and it should not be papered over. The prescribed maxima in section 6.1 are expressed over “a loan referred to in any of paragraphs 5(1)(a) to (d)” and over a line of credit under paragraph 5(1)(e); no maximum is prescribed for the paragraph 5(1)(f) class. The Act’s aggregate is defined in section 4(3) over “all loans made under this Act”. The two are not expressed in the same unit, and the registration form reflects that by requiring the lender to state the paragraph 5(1)(f) allocation separately from those for paragraphs 5(1)(a) to (e). A borrower close to a ceiling and relying on financing the fee should have the lender state in writing how it will count that allocation — not assume a resolution the text does not give.
Two changes, both worth more than they sound. The line was registered at $60,000 rather than $150,000, sized to the actual payroll cycle, with the intention of using section 4(1.2) to increase it later if the contract book grew. Fee at closing: $1,200 instead of $3,000 — and if the line is later increased to $150,000 the incremental fee is 2% of the $90,000 increase, the same total, paid only if the headroom is needed.
Second, the leasehold budget came in $22,000 under. Section 4(10)(a) requires the Minister, on a lender’s application within one year, to “refund to the lender that portion of the registration fee that is attributable to the portion of the loan that was not disbursed”. That is $440 back, and it is the lender that must apply — so the borrower has to ask. Section 4(11)(a) does the same for a line not made available.
The direct cost of the modelling error was $3,000 at closing on a deal where the buyer had budgeted his cash to the thousand, plus $3,000 at renewal. Not fatal, but it came out of working capital in month one on a business whose customers pay in sixty days.
The larger cost does not appear as a fee at all. Registering a line at the maximum in case costs 2% of headroom immediately and again on every renewal within five years, and none of it is refundable once the line has been made available. On a five-year view a $150,000 line drawn to $46,000 costs $6,000 in fees for $46,000 of usable liquidity. The fee is charged on what you asked for, not what you used.
The tell was that the model had one fee line and the term sheet had two facilities. Section 4 is written per class throughout — paragraph (a) for term loans, (b) for lines of credit, (1.1) for renewals, (1.2) for increases — and nothing in it is expressed per deal.
The second tell was the word authorised. Every other number in an acquisition model is a drawn number; this one is not. See working capital facilities alongside the term loan on sizing the facility.
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