Business line of credit calculator: what a draw costs
Enter your limit, the amount you draw and the rate to see the payment, the interest, the fees and how much of the line is free as you repay. The math runs in your browser, so nothing you type is sent to us.
How a business line of credit works
A line of credit gives you a limit to draw against instead of a lump sum. You take out what a bill or a slow month calls for, and you pay interest only on that amount, from the day you draw it. The rest of the limit sits there unused and costs nothing in interest.
As you repay, the principal you pay back becomes available to draw again, without a new application. Draw $25,000 on a $100,000 line and $75,000 is still free. Repay it weekly over 12 months at an example rate of 18% and about $86,939 is free again halfway through, and the full $100,000 once the draw is repaid.
Our line of credit page covers the lines in our network, and the guide to how a business line of credit works goes through draws, repayment and what lenders look for.
Each draw repaid over a set term
Each draw becomes a small loan of its own, repaid in level weekly or monthly payments over a term such as 6, 12 or 18 months. Every payment pays the interest due and some principal, and the principal portion is what frees up room on the line. Draw again before the first is repaid and the second draw starts its own schedule, so for a while you make both payments.
Interest only, repay when you can
Each month you pay the interest on whatever balance is drawn, and you pay the principal back when the cash comes in, in one sum or in pieces. The monthly bill is small, but the balance does not fall by itself, so the room on the line only comes back when you repay. The calculator assumes you pay each draw off in one sum after the number of months you choose.
How the calculator works
On a set-term line, each draw is treated as its own loan with a level payment, worked out from the draw, the rate and the number of payments. Each payment first covers the interest on the balance, and the rest pays down principal. A second draw gets its own schedule from the week or month you take it, and while both run their payments add together.
On an interest-only line, each month's payment is the balance times the yearly rate divided by 12. The principal comes back in one payment at the end. Fees are added on top: a draw fee as a percent of each draw, and a maintenance fee for each month or year that a draw is outstanding.
Take $25,000 drawn on a $100,000 line at an example rate of 18%, repaid over 12 months. The payment is $526.17 a week, or $2,292.00 a month on a monthly schedule, and the interest over the year comes to $2,361 on the weekly schedule.
- Rate per period
- APR ÷ 52 (weekly) or 12 (monthly)
- Set-term payment
- Draw × r ÷ (1 − (1 + r)^−n), r the rate per period, n the payments
- Interest-only payment
- Balance × APR ÷ 12, each month
- Available credit
- Credit limit − balance drawn
- Total cost
- Interest + draw fees + maintenance fees
- APR with fees
- Rate per period at which your payments repay the cash received × periods a year
What a $25,000 draw costs at three terms
The table takes the same $25,000 draw on a $100,000 line at an example rate of 18%, with no fees. A shorter term means bigger payments and less interest, and the line refills faster. Interest only keeps the payment low, but the interest runs on the full draw for the whole time you hold it.
Over 12 months the interest-only line costs $4,500 against $2,361 on the set term, because none of the balance is repaid until the end.
| Term | Weekly payment | Interest, set term | Free halfway | Interest only, monthly | Interest, interest only |
|---|---|---|---|---|---|
| 6 months | $1,007.12 | $1,185 | $87,219 | $375 | $2,250 |
| 12 months | $526.17 | $2,361 | $86,939 | $375 | $4,500 |
| 18 months | $366.28 | $3,570 | $86,659 | $375 | $6,750 |
Fees that change the cost
The rate tells you what the balance costs. Fees are charged on top, and on a short draw they can move the true cost a long way. A draw fee is a percent of each draw, taken when you draw. A maintenance fee is a flat charge each month or year for keeping the line open, whether you draw a little or a lot.
To put fees and interest into one figure, the calculator finds the APR with fees by the actuarial method in Appendix J of Regulation Z: the yearly rate at which your payments and fees repay only the cash that reached you. On the $25,000 example above, a 2% draw fee lifts the APR from 18% to about 22.1%. Add a $25 monthly maintenance fee and it comes to about 24.3%, for a total cost of $3,161 over the year.
Five checks before you sign
Ask how a new draw is repaid
Find out whether each draw gets its own term, or whether a new draw restarts the schedule for the whole balance. The second kind can stretch what you owe further out than you planned.
Get every fee in dollars
Ask for the draw fee, any monthly or annual maintenance fee, and any fee on the unused part of the limit, each in dollars for the draw you have in mind. Put them in the calculator to see the APR with fees.
Ask what paying a draw off early saves
Some lines drop the interest still to come when you repay a draw early. Others charge it anyway. Get the answer in writing before you count on it.
Check whether the rate can move
Ask whether the rate is fixed for each draw or tied to an index such as the prime rate. A rate that moves changes every payment after it does.
Ask what could lower the limit
A lender can review a line and reduce it or stop new draws. Ask what would lead to that and how much notice you would get, since the point of the line is that it is there when you need it.
Questions about line of credit costs
Line of credit calculator
Interest is charged on the balance you have drawn, at the yearly rate divided by the number of payment periods in a year. With $25,000 drawn at an example rate of 18%, the first month's interest is $375.00, or $86.54 for the first week on a weekly schedule. As payments bring the balance down, each period's interest falls with it.
It depends on how much you draw, the rate and the repayment style. Draw the full $50,000 at an example rate of 18% and repay it over 12 months, and the payment is about $1,052.33 a week or $4,584.00 a month. On an interest-only line it is $750.00 a month until you repay the $50,000. Draw $20,000 of it instead and the weekly payment is about $420.93.
No. Interest runs only on the amount you have drawn, and nothing is owed on the part of the limit you leave alone. Some lines do charge a maintenance fee or a fee on the unused limit, so ask whether yours has one and enter it in the calculator.
It can be when you need less than the full amount, or need it in stages. Drawing $25,000 from a $100,000 line at an example rate of 18% and repaying it weekly over 12 months costs about $2,361 in interest. A $100,000 term loan at the same rate and term costs about $9,442, because interest runs on all of it. Real offers for the two often come at different rates and fees, so compare them with your own numbers.
A draw fee is a charge, usually a percent of the amount, each time you take money from the line. A 2% fee on a $25,000 draw is $500. On that draw at 18% repaid weekly over 12 months, the fee lifts the APR from 18% to about 22.1%, by the Regulation Z method this calculator uses.
No. The calculator runs in your browser and sends nothing to us. The numbers are kept in the page address only so you can bookmark the page or send it to someone.
Read more about lines of credit
- Business lines of creditHow lines in our network work, what they are used for and how to apply.
- How a business line of credit worksDraws, weekly and monthly repayment, and what lenders look for.
- Merchant cash advance vs loanHow the two differ in cost, speed, paperwork and what happens when sales slow.
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