Hello GURU's

Been a while since I have been on.

We are having to take out a loan to cover short-term working capital. Let's say $2.0M with loan origination fees of 0.5%. It is a two year loan. I know that I can amortize the cost over the two years, and because it is in the normal course of business and reasonable, yada, yada, I believe that the fee is allowable. Saying that, can I just expense at close and cover it in "fees" (this is not prepaid interest, it is the closing costs, legal, documentation, etc.)

Thanks,

Marc

The person you want to hear from on this is here_2_help, but until you do, take a look at FAR 31.205-20, Interest and Other Financial Costs. Pay special attention to the phrase "costs of financing and refinancing capital." (It might not apply, since you are talking about "short term" working capital.)

Vern is too kind.

What you want to do is to check out ASBCA No. 56353, February, 2011, SRI International.

You want to see if what you are describing is what SRI International did. If so, your costs are allowable short-term costs that are not prohibited by 31.205-20 and may be allowable pursuant to 31.205-27(a)(3).

Hope this helps.