Is interest the only cost of issuing debt? No.

Interest is important as both the lender and borrower.

But, lenders have other ways to increase their returns.

Aka other fees.

One such fee is the commitment fee.

This fee ranges from 0.25% to 2% of the loan amount.

So, if you were to take on a loan of $100M, you would need to pay $2M in fees upfront to the lender.

Why? Because you are paying for the lender to go through and open the borrowing facility. This buys the borrower certainty that the lender will in fact extend the debt with the specified terms.

Market conditions may change since when the agreement is signed and when the credit is extended. So, this is a way to compensate the lender for that risk.

Another way to charge the fee would be for the lender to extend only $98M of credit. The borrower would still need to pay $100M in principal on the loan.

This is known as original issue discount (OID).

Bottom-line? Lenders demand fees outside of vanilla interest payments over the course of the loan.