What typically happens to a conditional fee based on utilization?

A conditional fee based on utilization is structured to reflect the actual use of funds or credit available to the borrower. This means that such fees are often contingent upon the amount that has been drawn or utilized from a facility, rather than being a static fee.

When a conditional fee is charged when drawn amounts exceed a certain threshold, it aligns the costs of borrowing with actual usage, providing the borrower with flexibility and a cost structure that adjusts based on their needs. For example, if a borrower only utilizes part of a credit line, they may only incur fees proportional to that portion rather than paying a fee on the entire facility upfront.

This mechanism incentivizes the borrower to optimize their usage of credit and can make financing more cost-effective. Thus, the fee structure directly correlates with the borrower's utilization of the facility, making it adjustable based on the level of drawing against the facility.