A commitment fee is what a lender charges on the part of a loan it has committed to you but that you have not drawn yet. The bank has to hold the money ready from the day of the commitment — it has refinanced or tied up the capital before a single euro has reached you — so it bills for the readiness instead of for the use. In German the charge is called Bereitstellungsprovision, or, colloquially, Bereitstellungszinsen.
The situation it typically arises in: a bank commits to a loan, but you don’t draw the full amount right away — because a construction project or an investment only needs the cash in stages. This guide covers how the fee differs from regular loan interest, when it starts, how it’s calculated, which clauses in the loan agreement decide its size — and what it means for a business that has to fit a tranche-based financing into its own 13-week cash flow forecast.
What is a commitment fee?
Under a loan agreement, the lender is obligated to make the agreed amount available (Section 488(1) BGB) — it has to be ready to pay out the committed sum the moment you draw on it. That readiness itself costs the bank something: it has refinanced or tied up capital before a single euro has reached you. The commitment fee is what the bank charges for exactly that — for the committed but still undrawn part of the loan.
The everyday term “Bereitstellungszinsen” is often used interchangeably, even though “Provision” (fee) is the more precise word: this is not interest in the sense of Section 488 BGB, because that interest only accrues on capital actually disbursed. The commitment fee, by contrast, runs on the portion not yet disbursed — that’s the key distinction.
Interest or fee — and what that means for you
In practice, both can apply under the same agreement once a loan is partially drawn:
- Interest under Section 488(1) BGB on the part already disbursed and not yet repaid.
- Commitment fee on the committed but still undrawn remainder.
The further disbursement progresses, the smaller the base for the commitment fee gets and the larger the base for interest gets — once the loan is fully disbursed, the fee disappears entirely, because there’s no undrawn amount left to charge it on. For a standard term loan with a fixed repayment schedule from day one, as covered in calculating a business loan, this question doesn’t come up at all — there, the full amount is drawn and starts accruing interest immediately.
When the commitment fee starts
Between the loan commitment and the start of the fee obligation, there is usually a commitment-fee-free period: a period set out in the loan agreement during which the bank already holds the amount ready but does not yet charge a fee for it. Only once that period ends does the fee start accruing on whatever remains undrawn at that point.
How long that period runs is entirely a matter of the individual loan agreement — there is no uniform or statutory duration. It’s common to negotiate the length of the fee-free period at signing to match the expected drawdown schedule: if you can realistically project when each tranche will be needed, you negotiate from a stronger position than someone who just builds in a generic buffer.
The fee obligation ends only once the loan is fully drawn, repaid early, or cancelled. If the borrower’s financial position deteriorates materially during this phase, the lender can in any case terminate the loan agreement under Section 490(1) BGB — before disbursement, in case of doubt, always; after a partial disbursement, as a rule. In other words, the exact phase in which the commitment fee is running is also the phase of highest cancellation risk for the undrawn part.
LiquidityLens shows how much of a financing has already been drawn and how much is still outstanding — straight from your real transactions, not from the next bank statement.
See the Liquidity Control SprintThe formula
For a full billing period, the commitment fee is a straightforward interest calculation on the undrawn amount:
| Figure | Formula |
|---|---|
| Commitment fee (period) | undrawn amount × annual rate ÷ 100 × days in the period ÷ 360 |
| Undrawn amount | committed loan amount − amount disbursed to date |
What actually governs the amount you owe is only what your loan agreement specifies for rate, billing period and day-count convention (actual days, or the commercial 360-day convention) — neither statute nor official statistics set a benchmark level for any of it.
Worked example
A worked example with generic illustrative figures and an assumed rate, not real terms: a committed term loan of €500,000, of which only €200,000 has been drawn once the fee-free period ends.
| Figure | Value |
|---|---|
| Committed loan amount | €500,000 |
| Drawn to date | €200,000 |
| Undrawn | €300,000 |
| Commission rate p.a. (assumed) | 3% |
| Billing period (one quarter, example) | 90 of 360 days |
| Fee for the quarter (example) | €300,000 × 3% × 90 ÷ 360 ≈ €2,250 |
If another tranche is drawn in the following quarter, the undrawn amount drops — and with it the base for the next fee calculation. That’s exactly why a prompt, well-planned drawdown saves real money, with no change to the rate itself.
What sets your commitment fee: five points in the loan agreement
There is no statutory level for a commitment fee and no published benchmark one — the number on your invoice comes out of your own loan agreement. Five clauses decide it, and all five are worth clarifying before you sign rather than after the first bill:
- The rate. Usually quoted as a percentage per year. Ask what it is in writing, not as a range.
- The basis. Normally the committed amount still undrawn at the time — but confirm it is the undrawn balance and not the full commitment, because the difference compounds over every billing period.
- The fee-free period. When it starts to run (commitment date, signing, or first availability) and how long it lasts. This is the clause with the most room to negotiate, and the one a realistic drawdown plan actually moves.
- The billing period and day-count convention. Monthly or quarterly, actual days or the commercial 360-day convention — this is what turns the rate into a euro amount.
- What happens if you reduce or cancel the undrawn part. Ask whether the agreement lets you release the commitment you no longer need, and what that costs. It is also the point at which the lender’s own right to terminate under Section 490(1) BGB is worth re-reading: the undrawn phase is the phase in which it bites hardest.
Four of the five are terms, not arithmetic — which is why going into the bank meeting with a drawdown schedule you can defend is worth more than any recalculation afterwards. The same preparation serves you on the rest of the financing: see preparing for the bank meeting.
For your cash flow forecast
For a business with a financing disbursed in tranches, the commitment fee is not a footnote — it’s a separate, recurring payment alongside interest and principal, and it belongs in the same 13-week cash flow forecast as any other payment that falls due.
First, it’s predictable once the rate, billing period and expected drawdown schedule are known — just like the interest and principal dates covered in calculating a business loan, which belong in the same forecast. Second, comparing the planned drawdown against actual construction progress or capex spend shows whether the committed amount still matches reality — or whether part of it is sitting idle, as an expensive reserve, longer than it needs to. How sustainable the financing is once interest, principal and the commitment fee all hit at once is exactly what debt service capacity measures — the free debt service capacity calculator puts available cash flow, interest and principal side by side and shows what headroom an additional financing leaves.
Commitment fees, interest and principal dates alongside every other cash in/out in one weekly grid — ready to use.
How to reduce the fee
The basic idea — a charge for capital held ready but unused — isn’t negotiable. The amount is:
- Match the commitment to actual need. Bring a realistic drawdown plan to the bank meeting, and you can often agree a commitment released in tranches instead of one large upfront amount — so the fee only ever runs on what’s genuinely still outstanding, not the full commitment.
- Negotiate the fee-free period deliberately. The more precisely you can project the expected need for funds at signing, the better your chances of agreeing a fee-free period that matches your own project timeline instead of the bank’s standard default.
- Draw down promptly instead of hoarding headroom. Every tranche drawn earlier immediately shrinks the base for the next fee calculation.
- Consider alternative instruments. For short-term, fluctuating needs without a fixed committed amount, overdraft facility cost is often the better-suited tool, because interest there runs only on the amount actually drawn — the same logic that applies to a negotiated credit line.
Frequently asked questions
The most common questions on commitment fees and the German Bereitstellungsprovision are gathered at the end of this page.