Business Line of Credit Cost Calculator
Enter a draw amount, stated rate, repayment timing, and draw fees to estimate the real cost of using a business line of credit. The result shows both the cash cost and an annualized rate that reflects fees deducted from the proceeds.
Effective annualized cost0.25%
- Estimated daily interest
- $16.44
- Estimated monthly interest
- $500.00
- Interest for borrowing period
- $1,479.45
- Total fees
- $1,250.00
- Net proceeds after fees
- $48,750.00
- Total financing cost
- $2,729.45
- Payoff before separate fees
- $51,479.45
- Cost as a percent of net proceeds
- 0.06%
Assumes the full draw remains outstanding for the entire borrowing period.
Uses simple interest on an actual/365 basis, including periods that span leap years.
Fees are treated as reducing economic proceeds at the start of the draw.
How to use this calculator
- Enter the amount you plan to draw from the credit line.
- Add the stated annual interest rate and the number of days before repayment.
- Enter any draw fee percentage and fixed fees tied to this borrowing period.
- Review the net proceeds, payoff amount, and effective annualized cost.
How the cost is calculated
A business line of credit usually quotes a stated annual interest rate, but a draw can also carry origination, draw, wire, documentation, or facility fees. This calculator treats those fees as an upfront reduction in the cash you actually receive, then compares that net cash amount with the payoff required at the end of the borrowing period.
The model uses simple interest on an actual/365 basis:
daily interest = D × r ÷ 365
period interest = D × r × t ÷ 365
total fees = D × f + O
net proceeds = D − total fees
effective annualized cost = (payoff ÷ net proceeds)^(365 ÷ t) − 1
- D is the amount drawn.
- r is the stated annual interest rate as a decimal.
- t is the number of days the draw stays outstanding.
- f is the draw-fee percentage as a decimal.
- O is the fixed fee amount assigned to this draw.
The payoff shown here is the amount drawn plus the simple interest for the period. The total financing cost is the period interest plus fees. Cost as a percent of net proceeds divides that financing cost by the cash available after upfront fees.
What moves the annualized cost most
Fees matter most when the repayment period is short. A 2% draw fee on a 90-day borrowing period is roughly four times as important, on an annualized basis, as the same fee on a one-year borrowing period. The stated interest rate matters more as the draw remains outstanding longer, because interest accrues every day on the full balance.
Net proceeds are also important. If fees are deducted from the advance, the business may receive less usable cash than the amount it must repay. Two offers with the same stated rate can therefore have very different economic costs if one has a large draw fee or fixed documentation charge.
What this calculator leaves out
This estimate is not a lender disclosure or a legally defined APR calculation. It assumes a constant balance, no principal payments before the payoff date, and no rate changes. It also keeps the common actual/365 convention even when the period spans a leap year.
Some lenders calculate interest from average daily balances, use actual/360, impose minimum interest charges, compound interest, finance fees into the balance, or charge fees on dates other than the draw date. This tool also excludes unused-line fees, renewal fees, late charges, taxes, collateral costs, and covenant-related charges.
Worked example
Suppose a business draws $50,000 at a 12% stated annual rate for 90 days. The daily interest is $50,000 × 12% ÷ 365, or $16.44. Over 90 days, interest is $1,479.45.
If the lender deducts a 2% draw fee plus a $250 fixed fee, total fees are $1,250 and net proceeds are $48,750. The total financing cost is $2,729.45, the payoff before separate fees is $51,479.45, and the cost is 5.60% of net proceeds. Annualized from 90 days, the effective cost is about 24.72%.
Common questions
How is interest on a business line of credit calculated?
Many business credit lines charge interest only on the outstanding draw, not the unused commitment. This calculator uses simple daily interest: amount drawn times the annual rate, divided by 365, times the days outstanding. Your agreement may use actual/360, average daily balance, or another method.
Do line-of-credit fees increase the effective borrowing rate?
Yes. A fee reduces the cash benefit of the draw or adds to the amount paid for the same cash need. The effect is largest on short draws because the fee is paid once while the borrowing period is brief.
What is the difference between the stated rate and APR?
The stated rate describes interest on the balance. APR-style comparisons also consider certain fees and timing, so they can be higher than the stated rate. This calculator gives an economic annualized cost, not a legally defined APR disclosure.
How much does a $50,000 credit-line draw cost for 90 days?
At a 12% stated annual rate, simple interest for 90 days is about $1,479. With a 2% draw fee and $250 of fixed fees, total financing cost is about $2,729 and net proceeds are $48,750.
Are draw fees deducted from the advance or added to the balance?
Either structure is possible, so read the credit agreement. This calculator treats fees as reducing the economic proceeds at the start of the draw. If your lender finances the fees into the balance, the timing and interest calculation can differ.
How can I compare a credit line with factoring or a merchant cash advance?
Compare the amount of usable cash received, the total dollars paid back, and the time until repayment. The effective annualized cost can make short-term products easier to compare, but it will not capture non-price terms such as collateral, guarantees, holdbacks, or renewal risk.