Leveraged Finance Interview Technical Practical Test 2026 - Free Practice Questions and Study Guide

Facility fees are typically structured to be paid quarterly in arrears. This means that the borrower pays the fees after the end of each quarter, based on the amount of credit facility available and utilized.

This structure allows companies to manage their cash flow effectively, aligning fee payments with their financial reporting periods. By paying in arrears, borrowers can account for the actual utilization of the facility and avoid upfront costs that do not reflect their borrowing needs.

In contrast, some other payment frequencies such as monthly or annually do not align as closely with common practices in leveraged finance, where costs and revenues are often assessed on a quarterly basis. Furthermore, paying upon loan drawdown is specific to the event of accessing funds and does not pertain to ongoing fees associated with maintaining a credit facility, which serve as compensation to lenders for keeping the capital available to the borrower.