Business Line of Credit Calculator
Calculate monthly interest costs, total fees, and effective APR on a business line of credit. See exactly what drawing from your credit line will cost — and compare it against a term loan — before you commit.
| Metric | Line of Credit | Term Loan |
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How Business Lines of Credit Work
A business line of credit is a revolving credit facility that gives your company flexible access to funds up to an approved limit. Unlike a term loan — where you receive a lump sum and make fixed payments — a line of credit lets you draw, repay, and redraw repeatedly as your cash flow needs change. According to the U.S. Small Business Administration (SBA), revolving credit lines are one of the most common tools small businesses use to bridge seasonal cash gaps and fund short-term working capital needs.
Interest accrues only on the outstanding drawn balance, not the full credit limit. For example, if your limit is $100,000 but you only draw $30,000, interest is calculated on $30,000 alone. Most lenders also charge a draw fee (typically 0–2% of each draw) plus a recurring monthly maintenance fee to keep the facility open.
Lines of credit come in two primary forms: secured (backed by receivables, inventory, or real estate — typically Prime + 1–6%) and unsecured (no collateral required, but rates are higher at Prime + 3–10%). As of 2026, the Federal Reserve's prime rate directly influences your effective cost; the Federal Reserve H.15 release publishes the current prime rate weekly.
Line of Credit vs Term Loan — When to Choose Each
Choosing between a line of credit and a term loan depends on the nature of your financing need:
Choose a line of credit when: You have recurring, variable cash flow gaps (payroll, inventory, seasonal expenses). You want flexibility to draw only what you need and pay interest on actual usage. You expect to repay and re-borrow within 12 months. Your need is ongoing working capital rather than a one-time purchase.
Choose a term loan when: You're making a specific capital investment (equipment, expansion, acquisition). You need a large lump sum upfront. You prefer predictable fixed monthly payments for budgeting. The use of funds is long-term (3–10 years).
The comparison table in this calculator shows both options side by side for the same drawn amount and APR so you can see exactly which is cheaper for your scenario. A term loan typically carries lower total interest for a single large draw because the principal amortizes from day one. A revolving line of credit wins when you draw partially and repay quickly, since you only pay for what you use and only for as long as you use it.
How to Qualify for a Business Line of Credit
Lenders evaluate five core factors when underwriting a business line of credit. Understanding these helps you prepare before applying:
1. Time in business: Most banks require 2+ years in operation. Online lenders may approve businesses as young as 6 months, but at higher rates. 2. Annual revenue: Traditional lenders typically want $100K+ annual revenue; some online lenders accept $50K+. 3. Credit score: A business FICO score above 680 opens access to bank rates; scores 580–680 qualify for online lender products at higher APRs. 4. Collateral: Secured lines use accounts receivable, inventory, or real estate as collateral, reducing your rate by 2–5 percentage points. 5. Debt service coverage ratio (DSCR): Lenders want your net operating income to cover all debt payments 1.25× or more. This calculator helps you model the monthly payment impact before you apply.
Last updated: May 2026. Rate benchmarks based on Federal Reserve H.15 prime rate data.