cost-calculation
Business Line of Credit Calculator (2026) — LOC Payment, Interest & Utilization
A business line of credit is not a term loan — and the difference matters for cost. With a LOC you pay interest only on what you draw, not on the full credit limit. A $200K line with $50K drawn costs $50K worth of interest; the remaining $150K sits available at no charge until you need it. This calculator shows the real monthly cost at your draw level, the structural advantage vs a term loan, and what it looks like under both interest-only and fully-amortizing repayment modes.
Educational estimate based on the inputs you entered — not financial, legal, or tax advice. Verify against your specific situation before acting on this output.
How it works
Methodology
Inputs
- Credit limit ($)
- Total approved line amount. Interest is NOT charged on this number — only on the drawn balance.
- Amount drawn ($)
- Outstanding balance you've borrowed. Interest accrues on this amount only. Can range from $0 (unused line) to the full credit limit.
- APR (%)
- Annual interest rate on the drawn balance. Most LOCs are variable-rate; this calculator holds the rate constant. Confirm with the lender.
- Repayment mode
- Interest-only: monthly payment = drawn × (APR ÷ 12). Amortizing: standard monthly payment that retires the full drawn balance over N months.
- Horizon / term (months)
- Interest-only mode: number of months to project interest cost (principal still owed at end). Amortizing mode: payoff term in months.
Formula
Interest-only monthly payment = drawn × (APR / 100 / 12) Total interest (interest-only) = monthly payment × horizon months Total repaid (interest-only) = total interest + drawn principal Amortizing monthly payment = drawn × r / (1 − (1 + r)^−N) where r = APR / 100 / 12, N = term months Total repaid (amortizing) = monthly payment × N Total interest (amortizing) = total repaid − drawn Utilization % = drawn / credit limit × 100
Assumptions
- Rate is held constant over the horizon. LOC rates are typically variable (Prime + spread); actual payment changes as the index moves.
- Interest-only mode does not model compounding of unpaid principal — assumes interest is paid each month and the drawn balance stays constant.
- Amortizing mode uses the standard fully-amortizing formula with no balloon, no interest-only ramp.
- Does not model origination fees, annual fees, draw fees, or non-usage fees — all of which increase the true cost of a LOC. Ask the lender for the all-in cost.
- Approval odds context: the Federal Reserve's 2024 Small Business Credit Survey found 54% of applicants who sought financing at small banks were approved in full — a materially better full-approval rate than most alternative online lenders report, but it requires the credit profile and documentation a bank underwrites for.
- Disclosure-law context: eleven states had a commercial financing disclosure law in effect as of October 10, 2026, requiring providers to give borrowers a written cost disclosure before signing; seven of them (California, Florida, Georgia, Kansas, Missouri, New York, and Utah) also cover commercial loans and open-end credit such as lines of credit. Confirm current requirements in your state.
- Not an offer, not approval, not a binding pre-qualification. Educational estimator only.
Worked examples
$50K limit · $20K drawn · 12% APR · Interest-only
- Credit limit
- $50,000
- Amount drawn
- $20,000
- APR
- 12%
- Mode
- Interest-only
- Horizon
- 12 months
Monthly interest: $200. Total interest over 12 months: $2,400. Utilization: 40% — well within the healthy range. The remaining $30,000 limit costs nothing until drawn. Total repaid at month 12: $22,400 (interest + principal).
$100K limit · $60K drawn · 14.5% APR · Amortize 24mo
- Credit limit
- $100,000
- Amount drawn
- $60,000
- APR
- 14.5%
- Mode
- Amortize
- Term
- 24 months
Monthly payment ≈ $2,897. Total interest ≈ $9,528. Total repaid ≈ $69,528. Utilization: 60% — moderate. Amortizing over 24 months keeps payments predictable and clears the draw before a typical LOC renewal cycle.
$25K limit · $25K drawn · 18% APR · Amortize 12mo
- Credit limit
- $25,000
- Amount drawn
- $25,000
- APR
- 18%
- Mode
- Amortize
- Term
- 12 months
Monthly payment ≈ $2,292. Total interest ≈ $2,504. Total repaid ≈ $27,504. Utilization: 100% — fully drawn. At 18% APR, paying down over 12 months keeps total interest cost modest ($2,504). At 100% utilization there's no remaining buffer; consider whether a slightly larger line would preserve flexibility.
Frequently asked
Questions readers ask
How does interest on a business line of credit work? +
Interest accrues only on the outstanding drawn balance — not the full credit limit. If you have a $100K line and draw $30K, you pay interest on $30K. As you repay principal, the interest charge drops proportionally. This is the revolving structure: repay principal and the capacity becomes available to draw again.
What is the difference between interest-only and amortizing repayment on a LOC? +
Interest-only means you pay only the interest charge each month — the principal stays outstanding until you choose to repay it or the draw period ends. Amortizing means you make fixed monthly payments that pay down both principal and interest over a defined term, exactly like a term loan. Many LOCs allow interest-only draws for a set period (often 12-24 months) followed by an amortizing repayment phase. Confirm the structure with the lender.
What APR should I expect on a business line of credit in 2026? +
Directional ranges in 2026: bank-tier revolving LOCs typically run 7–12% APR, often pegged to Prime plus a spread (so the rate adjusts as the Fed moves). Non-bank LOCs typically run 12–20% APR. Alt-credit revolving products can run higher. Your actual rate depends on FICO, time-in-business, monthly revenue, deposit consistency, and existing debt. Confirm with the lender — don't assume the rate you see in a headline applies to your file.
Does drawing on a line of credit hurt my credit score? +
Drawing increases your credit utilization — the ratio of outstanding balance to credit limit — which is a factor in business credit scoring. Keeping utilization below 30-50% of the limit is generally recommended to protect your score. The calculator shows your utilization percentage so you can see where a planned draw lands relative to that threshold.
When is a line of credit better than a term loan? +
A LOC is the right tool for recurring, variable working capital needs — inventory cycles, seasonal cash gaps, bridging receivables, or keeping an emergency buffer available. A term loan is cleaner for a single, defined capital event (equipment purchase, build-out, acquisition) because it disburses the full amount at funding. The cost comparison flips depending on how much of the limit you actually draw and for how long.
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This tool is for educational purposes only and is not financial, legal, or tax advice. Final terms and eligibility depend on lender underwriting; consult a tax professional before acting on tax-tool output. ClearValue Lending is a funding platform.
https://clearvaluelending.com/tools/business-line-of-credit-calculator