sum required by a lender to provide a standby commitment. The fee is forfeited should the loan not be closed within a specified time.
the sum required by a lender to provide a standby commitmentSeestandby loan. The fee is forfeited should the loan not be closed within a specified time.
Example: A developer obtains a standby loan on a project to be developed. The developer hopes interest rate will decline during the construction period so that permanent financing may be arranged with terms better than those on the standby loan. However, a permanent loan commitment is required to obtain a construction loan. The developer pays a standby fee to compensate the lender for making the standby loan commitment. At the completion of construction, the developer has the optionof exercising the standby commitment or forfeiting the fee.
