Drop Dead Fee

Categories: Company Management

Courtesy of a mob boss, a drop dead fee is money a borrower must pay to a lender if the borrower’s deal to acquire a company falls though.

Like...there’s someone who wants to buy a business, but they don’t have the cash to buy it, so they take out a loan. If it turns out the borrower can’t buy it (maybe the company changes its mind, or sells to a higher bidder), then the borrower doesn’t need that loan after all. The drop dead fee is a fee that the loaning institution gets paid by the borrower, who comes back to the bank with his tail between his legs.

The borrower must return the money borrowed, along with a “sorry for the trouble, here’s some money of lost interest for you” fee. That is the drop dead fee. It's more common in the UK than the U.S., but it’s also a thing elsewhere in the world.

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