Business Line of Credit Calculator
Estimate what a draw on your business line of credit will cost. Set your draw amount, rate, repayment style, and term to see your monthly payment, total interest, and total repaid — updated instantly.
How the line of credit calculator works
A business line of credit is revolving credit: you get a limit, draw what you need, and pay interest only on the amount drawn. This calculator models the cost of a single draw so you can see the real monthly commitment before you tap the line. It supports the two most common repayment styles — interest-only and fully amortizing.
Amortizing: payment = draw × r ÷ (1 − (1 + r)−n), where r is the monthly rate and n is the number of months.
With interest-only repayment, every payment is pure interest, so the payment is low but you still owe the entire draw at the end of the period. Total interest is simply the monthly interest multiplied by the number of months. With amortizing repayment, each payment chips away at the principal too, so the balance reaches zero by the final month and total interest is the sum of all payments minus the amount you borrowed.
What affects your line of credit cost
- Draw amount — you only pay interest on what you actually draw, not your full limit.
- APR — line of credit rates are often variable and can be higher than term-loan rates.
- Repayment type — interest-only keeps payments low but leaves the principal due; amortizing clears the balance.
- Repayment period — a longer period lowers amortizing payments but adds more months of interest.
When a line of credit makes sense
Lines of credit are ideal for short-term, recurring needs such as covering payroll gaps, buying inventory ahead of a busy season, or smoothing out uneven cash flow. Because you can repay and re-borrow, a line can be cheaper than a term loan if you use it briefly and pay it down fast. But interest-only draws can lull you into carrying a balance indefinitely — watch the balance owed at the end. To compare against a fixed loan, use the business loan calculator, and check your working capital to see how much cushion you really need.
Frequently asked questions
How does a business line of credit work?
A line of credit gives you a credit limit you can draw from as needed. You only pay interest on the amount you draw, not the full limit, and you can repay and re-borrow as your balance allows.
What is the difference between interest-only and amortizing repayment?
With interest-only payments, you pay just the interest each month and the full principal remains due at the end. With amortizing payments, each payment covers interest plus part of the principal, so the balance reaches zero by the last payment.
How is the payment on a line of credit calculated?
For interest-only, the payment is the draw amount times the monthly interest rate. For amortizing, it uses the standard amortization formula over the number of repayment months. The monthly rate is the APR divided by 12.
Is a line of credit cheaper than a term loan?
It depends. A line of credit is flexible and you only pay for what you use, but rates are often variable and interest-only periods can hide the fact that principal is still owed. Compare total interest and total repaid before deciding.
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This calculator is for educational and informational purposes only and does not constitute financial, legal, or lending advice. Estimates are based on the values you enter and assume a fixed rate. Actual line-of-credit terms, variable rates, and fees vary by lender.