What you really pay in a private credit term sheet.
In short
The fees a UK lower-mid-market borrower meets in a private credit term sheet, taken one at a time. The coupon is a margin over SONIA, broadly 550 to 800 basis points. On top sit an original issue discount that funds you below par, an arrangement fee of around 1.5 to 3%, PIK interest that rolls up instead of being paid in cash, exit fees and call protection that price the fund's expected hold, and sometimes warrants or a ticking fee on undrawn commitments. Stacked together they lift the true annual yield well above the headline coupon, which is why the all-in cost is the figure to compare.
Written by Gregory Elgunov, Managing Director · Last reviewed 25 September 2026
A private credit term sheet quotes a coupon, and around it sit separate charges, none of which shows in the headline rate. They include an original issue discount that funds you below the face value you repay, an arrangement fee heavier than a bank’s, interest that can roll up instead of being paid in cash, a premium for leaving early, and on some deals a slice of your equity or a fee on money you have not drawn. This guide takes each in the order you meet it, at September 2026 rates, and the calculator in section 08 adds up the coupon, fee, discount and exit cost for two offers on your own numbers.
Written for the borrower’s side of the table. This is general guidance, not advice on your specific facility. It deepens the shorter answers in our working guide.
A margin over SONIA, and the easiest line in the term sheet to compare.
A private credit loan is priced as a floating margin over SONIA, broadly 550 to 800 basis points in the UK mid-market. SONIA sat at 3.73% on 22 September 2026 against a Bank Rate of 3.75%, held at the Bank of England’s September meeting. Bank of England, Bank Rate. So the coupon on a fund deal lands at roughly 9.25% to 11.75% before a single fee, against a bank coupon near 6.75% on a clean term loan, a 3% margin over the same reference. It moves with leverage, sector and credit quality, and it is the number every fund leads with.
The coupon is the easiest line to compare, because it is stated as a rate and competition moves it. Beside it a bank adds a modest arrangement fee and, on an undrawn revolver, a commitment fee; a fund adds more charges outside the coupon, most of them structured so they do not read as interest. Fig. 01 sets each against the bank, and our guide to unitranche and bank senior debt compares the two on cost, leverage and covenants.
The charges around the coupon, bank against fund.
| Charge | Bank | Fund |
|---|---|---|
| Arrangement fee | Nearer 1% of the facility, on the committed amount | Commonly 1.5% to 3%, on the committed amount |
| Original issue discount | None | Funded at 98 to 99, often in place of part of the fee; one to two points is common, two or three on some deals |
| Fee on undrawn money | A commitment fee on an undrawn revolver, around 35% of the margin | A ticking fee on committed money not yet drawn, which often steps up from a fraction of the margin toward the full margin |
| Interest paid in kind | Cash-pay, the ordinary case | On some deals, PIK rolls interest into the balance to compound; a toggle lets you elect it, often at a step-up of 50 to 75 basis points |
| Repaying early | Most term loans prepaid at par; a revolver draws and repays freely | A short non-call period, then a premium of around 3% in year one, 2% in year two and 1% in year three, then par; occasionally a make-whole |
| Exit fee | Rare | Common, and charged on any repayment, including at maturity |
| Warrant or equity kicker | Rarely used | On highly geared or fast-growing credits, a small slice of equity, or a synthetic return keyed to a sale |
The fund advances you less than you sign up to repay.
Original issue discount, or OID, means the fund advances less than the face value of the loan while you repay the face in full, so a £10m loan at 98 funds you £9.8m and repays £10m. It is quoted as a price, so borrowers miss it; count it as an upfront fee. The fund earns a return on money it never advanced, and earns it faster if you repay early, so the discount lifts its true yield without touching the rate on the page and makes an early refinancing dearer. Our guide to the all-in cost of raising debt counts it the same way.
A one-off charge at close, heavier than a bank’s.
The arrangement fee, also written as an upfront, structuring or completion fee, is paid once at completion on the committed amount, so a facility sized larger than you need carries its fee on the unused part too. On a £10m fund facility a 2.5% fee is £250,000, payable whether the deal runs its full term or you refinance in a year. The fee and the discount stack, so a fund can quote a keen coupon and take its margin back through a 3% fee and a 1% OID. The fee is more negotiable than borrowers assume, and a fund that knows two others are quoting has a reason to shave it.
Interest that rolls into the balance instead of being paid in cash.
PIK, payment-in-kind, interest is added to the loan balance instead of being paid quarterly in cash, so it compounds and the accrued sum falls due at maturity or on exit. It appears on some fund deals, where leverage is high or a growth plan needs its cash in the early years. A PIK toggle lets the borrower elect, period by period, to roll up a slice of the coupon at a rate set above the cash rate, and because interest compounds on interest it is the most expensive debt in the structure. It can carry a business through an investment phase. Where the plan cannot service the debt in cash at any point, rolling the interest up only adds to what the next refinancing has to repay.
A premium for leaving before the fund’s expected hold is up.
Call protection is the premium a fund charges if you repay before an agreed date, and it prices the fund’s expectation of a multi-year hold. An exit fee is a flat charge on repayment, due at maturity as well as on an early exit, so waiting does not avoid it. A make-whole, where one applies, pays the fund the interest it would have earned to a set date, which can be dear enough to lock you in. The protection matters most to anyone expecting a sale, a recapitalisation or a refinancing inside the protected years, for whom a keen coupon with heavy protection can be the dearer deal. Enter the exit fee and any premium as an exit cost in the calculator in section 08, and negotiate the step-down shorter or a repayment at par on a change of control.
Some deals add a slice of equity, or a fee on money you have not drawn.
A warrant is a right for the fund to subscribe for a small slice of equity, or to take a synthetic return keyed to a sale or a valuation, so part of the cost is paid in ownership and exit value. Its cost depends on what the business is later worth, which makes it the hardest charge to price in advance; resist it, or cap it hard, where the coupon already prices the risk.
A ticking fee pays the fund for reserving money it cannot lend elsewhere, on a delayed-draw term loan or an acquisition facility where you draw as the spending lands. It often steps up the longer the money stays undrawn, so size the commitment to what you will draw.
Stacked together, the fees lift the true yield past the coupon.
The calculator starts from this guide’s worked example at September 2026 rates, with its starting values set out under the figure. Replace any line with the figures from your own term sheets.
Two term sheets, costed on the same basis.
The guide’s example · edit any figure
Offer A
Offer B
Name
Facility
The face value you sign up to repay.
Reference rate
The guide’s example uses SONIA at 3.73%. For a fixed rate, enter 0 here and the whole rate as the margin.
Margin
The guide’s bank example uses 3%; a fund is broadly 5.5 to 8%, that is 550 to 800 basis points. For a PIK toggle, add the step-up to the margin.
Arrangement fee
Nearer 1% from a bank; commonly 1.5 to 3% from a fund.
Funded at
The OID price per 100 of face value. 100 means no discount; a fund commonly funds at 98 to 99.
Exit fee and any prepayment premium
An exit fee is due at maturity as well as on an early exit. Add any premium for repaying inside the protected years, around 3% in year one, 2% in year two and 1% in year three, then par.
Until you expect to repay, sell or refinance. A fund prices its return over a hold of three to five years; the upfront costs are spread over whatever you enter.
Difference over 3 years: interest, fees, discount and exit cost
£1,040,000
Fund unitranche costs more than Bank term loan: £2,735,200 against £1,695,200.
Offer ABank term loan
Offer BFund unitranche
- Coupon, reference rate plus margin
- Offer A: 6.73%
- Offer B: 10.23%
- Interest a year
- Offer A: £538,400
- Offer B: £818,400
- Upfront fee and discount
- Offer A: £80,000
- Offer B: £280,000
- Net cash at drawdown, after fee and discount
- Offer A: £7,920,000
- Offer B: £7,720,000
- Exit fee and any prepayment premium
- Offer A: £0
- Offer B: £0
- Interest and fees over 3 years
- Offer A: £1,695,200
- Offer B: £2,735,200
- All-in a year, as a simple spread
- Offer A: 7.06%
- Offer B: 11.40%
The all-in figure is the coupon plus the upfront and exit costs divided by the years. It is a simple spread, not a yield to maturity. A pound paid at completion counts the same as a pound paid later, so it understates the true yield, most on the offer with the larger upfront cost. The discount counts as a cost because the full face value is repaid.
| Offer | Interest over 3 years | Arrangement fee, discount and exit fee | Total |
|---|---|---|---|
| Bank term loan | £1.62m | £80k | £1.70m |
| Fund unitranche | £2.46m | £280k | £2.74m |
- Interest over 3 years
- Arrangement fee, discount and exit fee
An illustration of the arithmetic with your inputs, not an offer or a quote. It assumes the whole facility is drawn at completion and repaid in one sum, with the reference rate unchanged. Calculated in your browser.
Starting values: £8m from each lender, repaid at the third anniversary, with SONIA at 3.73%. The bank at a 3% margin with a 1% fee and no discount, this guide’s bank conventions; the fund at a 6.5% margin with a 2.5% fee and a one-point discount, points inside this guide’s ranges.
On the example, the fund’s £280,000 at close, 3.5% of the facility, adds a little over one percentage point a year across three years and takes its all-in cost past 11%, before legal, diligence or adviser costs, call protection or PIK. Interest is still the largest cost; the fees add to the total and change what an early refinancing costs. Where a bank will fund the plan, the premium buys nothing the bank would not provide; where it will not, the premium pays for the leverage or the timetable the bank cannot offer. Ask every lender for one all-in cost to your expected exit, on identical assumptions, because a fund that knows it is being compared prices each of these lines differently.
Ask for the same cost schedule from each lender.
Put the offers side by side using the same funding need and expected repayment date. Work through these checks with the term sheet and fee letter open. If an amount or trigger is missing, ask the lender to confirm it in writing before treating that offer as cheaper.
The money available at completion
Record the amount you will draw, then deduct any OID, fees and costs withheld at completion. Confirm that the cash reaching the business covers the funding need.
Read how OID changes the proceedsWhat each fee is charged on
For each fee, record its cash amount, when it is due and whether it applies to the whole commitment or only the money drawn. Check the fee letter alongside the term sheet.
Read the arrangement-fee mechanicsThe cash paid during the loan
Use the same drawdown schedule, repayment dates and reference-rate assumption for each offer. Separate cash interest from any PIK, and include charges on undrawn commitments.
Read how PIK builds the balanceThe bill when you leave
Ask for the amount repayable on your planned exit date and on an earlier refinancing date. Include accrued PIK, exit fees and any prepayment premium or make-whole that applies.
Read the early-repayment termsThe rights sitting outside the fee total
Record any warrant separately with its dilution assumptions. Read covenants, security and guarantees alongside the cost: the facility also needs to accommodate the business plan.
Read the wider term-sheet review
For your own facility
Make sense of the offer in front of you.
If you are weighing a private credit offer against a bank, or a fee needs explaining, we can start with the decision you need to make and the terms that may affect it.
Tell us what you are financing and your decision date. An outline is enough for the first note; we can agree what documents are useful after that.
The first conversation is confidential and costs nothing. Any advisory work and fees are agreed separately.
The terms in this guide
Each is defined in full in the library, with the levels and conventions that apply at £3-15m.
- Exit fee
An exit fee is charged when the facility is repaid, including at maturity. Unlike call protection it is not avoided by waiting, which is why it is easy to miss when comparing offers.
- Original issue discount (OID)
Original issue discount means the lender advances less than the face amount of the loan. You receive 98 or 99 pence in the pound and repay the whole pound, so the discount is interest collected at the front.