Commitment Fee
Private Credit glossary · Documentation, Covenants & Terms
Definition
Fee paid on the undrawn portion of a revolving or delayed-draw facility, typically 25–50 bps annually. Compensates the lender for the cost of holding the commitment available (regulatory capital, liquidity earmark) without earning the full coupon. On delayed-draw facilities (DDTLs) the equivalent fee is called a ticking fee and runs higher (50–100 bps) because the draw is more likely.
Commitment Fee in plain English
Sometimes a lender promises to have money READY for a borrower to grab later, even if the borrower hasn't taken it yet — like a credit card with a limit you haven't spent. Keeping that money on standby isn't free for the lender (they have to set cash aside and can't fully use it elsewhere), so they charge a small commitment fee on the un-borrowed part, usually about $0.25 to $0.50 per year for every $100 available. When the loan is a 'delayed-draw' type — where the borrower is quite likely to actually take the money on a known schedule — the standby fee is bigger (roughly $0.50 to $1.00 per $100) and is nicknamed a 'ticking fee,' because the clock is really ticking toward a real drawdown.
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Practice Commitment Fee
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