A business line of credit (LOC) is one of the most flexible funding tools a small company can carry. Unlike a term loan that hands you one lump sum and locks you into a fixed repayment schedule, a revolving line lets you draw, repay, and draw again up to a pre-approved cap. You pay interest only on what you actually borrow — not on the full credit line. This calculator turns your lender's offer into plain numbers: the monthly interest that accrues, the minimum payment you must send, the credit you still have free, and how heavily you are using the line.
Adjust the four inputs below and every figure updates instantly. Run the numbers at your current drawn balance, then push the drawn amount up to see how a seasonal inventory build or a slow-paying customer would change your monthly bill.
How to Use
- Enter your Credit Line Limit — the maximum the bank or online lender has approved. For a new borrower this is often $25,000–$250,000; established businesses can reach $500,000 or more.
- Set the Amount Currently Drawn — the balance you have already taken out and owe. If you have not drawn anything yet, enter 0 and the calculator will show the line sitting fully available.
- Type your Interest Rate (APR). Business LOCs commonly run 8%–24% depending on whether it is secured (by real estate or inventory) or unsecured. If you have not been quoted a rate, test 10% as a middle case.
- Choose your Minimum Payment percentage. Most revolving lines require the greater of accrued interest or 1%–3% of the outstanding balance each month; 2% is a typical default.
The result card then shows your current drawn balance, the dollar amount of credit still available, your credit utilization percentage, the monthly interest charge, the interest-only payment, and the minimum monthly payment you must actually send to stay current.
How the Math Works
A business line of credit is revolving, so interest does not amortize like a term loan. Instead, interest accrues on the drawn balance each month and is billed separately:
Monthly interest charge = drawn balance × APR ÷ 12
Your minimum payment is then the larger of two numbers: the interest that accrued this month, or your agreed percentage of the drawn balance. Pay only the minimum and the balance stays roughly flat or shrinks slowly; pay more and you free up available credit immediately.
Worked example on a $50,000 line with $20,000 drawn at a 10% APR: the monthly interest is $20,000 × 0.10 ÷ 12 = $166.67. A 2% minimum-payment rule computes to $20,000 × 0.02 = $400. Because $400 is larger than the interest, your minimum due that month is $400. Only $166.67 of that covers interest; the remaining $233.33 pays down principal and immediately replenishes your available credit.
If you instead ran an interest-only payment, you would send just $166.67 and the $20,000 balance would not shrink at all — useful when cash is tight, but it means you never pay down the principal.
Why Utilization Matters
Your credit utilization on the line is the drawn balance divided by the total limit, shown as a percentage. Lenders and business credit bureaus watch this number closely. Drawing more than 30%–40% of your available line is considered high utilization, and it can (a) trigger a lower credit score, (b) cause the lender to review or reduce your limit, and (c) signal to underwriters that you are close to maxing out. On a $50,000 line, keeping the drawn balance under $15,000–$20,000 keeps utilization at or below the commonly cited 30%–40% comfort zone.
Examples
Example 1 — The default small-business case. A café is approved for a $50,000 business line of credit, draws $20,000 to buy a new espresso machine and stock the pantry, and is charged 10% APR with a 2% minimum payment. The monthly interest is $166.67; the 2% minimum computes to $400; available credit is $30,000; utilization sits at 40%. Sending the $400 minimum pays the machine down gradually without straining the operating budget.
Example 2 — Interest-only during a slow season. A seasonal retailer draws $80,000 against a $100,000 line at 12% APR but negotiates a 1% minimum-payment term. The monthly interest is $80,000 × 0.12 ÷ 12 = $800, and 1% of the balance is also $800 — so the minimum due is exactly $800. During the off-season the owner sends $800 just to cover interest; once holiday sales arrive they push payments above the minimum to rebuild available credit.
Example 3 — A large revolving facility. An established wholesaler holds a $1,000,000 secured line and has $500,000 drawn at 8% APR with a 2% minimum. The monthly interest is $3,333.33, while 2% of the drawn balance is $10,000 — so the minimum payment is the larger figure, $10,000. Available credit is $500,000 and utilization is 50%. Even on a seven-figure line, the same simple formula governs the bill.
FAQ
How is business line of credit interest calculated?
Interest is charged only on the money you have actually borrowed, not on your full credit limit. The monthly interest charge equals the drawn balance times the annual APR divided by 12. For example, $20,000 drawn at a 10% APR costs $20,000 × 0.10 ÷ 12 = $166.67 in interest that month.
What is the minimum payment on a business line of credit?
Lenders typically require the greater of (a) all interest accrued that month, or (b) a percentage of the drawn balance — often 1%–3%. On a $20,000 balance at a 2% minimum rule, that works out to $400, which usually exceeds the interest charge and is the amount you must pay to stay current.
How much can I borrow on a business line of credit?
Limits vary widely. Unsecured lines for newer small businesses often start at $10,000–$100,000, while secured lines backed by inventory, equipment, or real estate can reach $250,000 to over $1,000,000. Approval depends on your time in business, annual revenue, credit score, and collateral.
Is a business line of credit better than a term loan?
It depends on your need. A term loan gives you one lump sum at a fixed rate and is best for a single known purchase. A line of credit is revolving — you draw and repay repeatedly — and shines for unpredictable working-capital gaps like payroll timing, inventory swings, or slow-paying customers. You only pay interest on what you use.
Does paying interest only hurt my business?
Interest-only payments keep the loan current but never reduce the principal, so your drawn balance stays flat. They can be a smart bridge during a cash-flow crunch, but if you rely on them for months on end you are left carrying the same debt indefinitely. Use interest-only as a temporary tool, then pay above the minimum when cash flow recovers.
How is credit utilization on a business line of credit calculated?
Divide the drawn balance by the total credit limit and multiply by 100. On a $50,000 line with $20,000 drawn, utilization is 40%. Keeping utilization below roughly 30%–40% protects your business credit profile and reduces the chance the lender tightens your limit.
Disclaimer
This business line of credit calculator is provided for informational purposes only and does not constitute financial, lending, tax, or legal advice. Figures are estimates based on the inputs you enter and a simple monthly-interest model; actual lender terms, daily compounding conventions, fees, and minimum-payment rules vary widely by institution and by credit profile. Always confirm your exact payment, rate, and terms directly with your lender before drawing on a business line of credit.