How a line of credit payment works
A business line of credit lets you draw money up to a limit and pay interest only on what you have drawn. This calculator takes the amount drawn, not the limit, and shows the payments under four ways of repaying: interest only, interest only for a draw period and then equal payments, equal payments over the whole term, or a percentage of the balance each month.
The monthly rate is the APR divided by 12, which is how Regulation Z relates the periodic rate to the APR for consumer open-end credit (12 CFR 1026.14(b)); business credit is outside consumer rules, but lenders quote the same way, so check your agreement. Some lenders accrue interest daily at the APR ÷ 365, which comes to the same amount over an average month. Fees, the credit limit and changes to the rate are not modelled.
Worked example: $50,000 at 10% with a 12-month draw period
Drawing $50,000 at 10% over 60 months, with 12 months of interest only and then equal payments over the other 48 months, you pay $416.67 a month during the draw period and $1,268.13 a month after it. The total interest is $15,870.20 and you pay $65,870.20 in total.
Interest only, equal payments or a percentage of the balance
On $20,000 at 13.24% over 48 months, interest only costs $220.67 a month and $10,592.00 of interest, and the $20,000 is still owed at the end. Icon Business Bank's loan and credit line payment calculator showed $10,592.16, which is its payment rounded to the cent and multiplied by 48.
Equal payments over the same 48 months are $538.94 a month with $5,868.90 of interest. A payment of 1% of the balance starts at $200.00 and, because 13.24% a year is about 1.10% a month, the balance grows to $21,016.48 after 48 months. At 2% it falls to $12,979.76. The calculator shows a warning when the percentage does not cover the monthly interest.
Compared with a fixed-term loan
The results also show a fixed-term loan for the same amount, rate and term. For the $50,000 example that is $1,062.35 a month and $13,741.13 of interest, compared with the draw-period line's $15,870.20: interest only in the first year costs more in total because the balance is not falling.
What this calculator leaves out
It leaves out origination, draw, annual and maintenance fees, the credit limit, a variable rate and collateral. The rate you enter should be the rate on the amount drawn. A lender's APR may include fees and use different assumptions, so compare offers on their stated terms.
To price a fixed-term business loan with fees and an APR, use the business loan calculator.
To price a flex-style instalment loan with early payoff, use the flex loan calculator.
Use the right country page
This page uses dollars and US terms. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the UK business line of credit loan calculator, which works in pounds and turns the yearly rate into a monthly rate with the effective-rate convention. Inputs reset and amounts are not converted.
Inputs for the business line of credit calculator
Amount drawn
The amount you have used, not the credit limit. Interest is charged on this.
Interest rate (APR)
The yearly rate on the amount drawn, from your offer.
How you repay
Choose how the payment is set. The fields below say which options use them.
Term
The months to model. A whole number up to 600.
Interest-only months
Used for interest only, then equal payments. Must be fewer than the term.
Percentage of the balance
Used for a percentage of the balance. Take it from the lender's terms.
CALCULATOR QUESTIONS
US business line of credit calculator questions
What does a business line of credit cost?
Interest on the amount drawn, plus any fees. On $50,000 at 10% over 60 months with a 12-month draw period the interest is $15,870.20.
What is a draw period?
A stretch at the start when you pay only the interest on what you have drawn, here $416.67 a month, before you repay the balance in equal payments of $1,268.13 a month.
What happens with a percentage-of-balance payment?
The payment falls as the balance falls. If the percentage is lower than the monthly interest rate, the balance grows instead; the calculator warns you.
How is it different from a term loan?
A term loan amortises from the start. For $50,000 at 10% over 60 months that is $1,062.35 a month and $13,741.13 of interest.
Does interest accrue daily?
Some lenders charge the APR divided by 365 each day on the drawn balance. Over an average month that comes to the same as dividing the APR by 12, so the calculator uses the monthly rate.