Business Line of Credit Calculator
True cost of a credit line.
Calculate total business line of credit cost including interest on drawn balance and unused commitment fees on the undrawn portion.
What this tool does
This calculator shows the total cost of a business line of credit by combining two separate charges: interest paid on the portion you draw and fees charged on the undrawn portion. The result illustrates what you pay across your chosen timeframe based on your credit limit, average balance drawn, interest rate, and unused commitment fee rate. Interest charges depend primarily on how much you borrow and for how long, while unused fees reflect the difference between your limit and average drawn balance. The calculation models these costs independently and adds them together. Note that this calculation assumes a consistent average balance and does not account for variable rates, payment timing, or other potential fees that may apply to your specific arrangement. This serves as an educational illustration of how these two fee structures interact.
Quick answer: with the default values, the result is $16,750.00 (Total LOC Cost). Adjust the values below for your own figures.
Enter Values
People also use
Startup & VC
Business Loan Calculator
Calculate business loan monthly repayment and the cumulative interest paid across the loan's full term at any rate and amortisation length.
Startup & VC
Business Exit Value Calculator
Estimate your business exit value using a blended revenue and profit multiple approach with an industry growth factor applied.
Startup & VC
Business Idea Profitability Calculator
Calculate gross profit and break-even volume for a business idea from unit economics. Enter unit revenue to see per-unit profit and break-even volume.
Formula Used
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
A business line of credit costs two things: interest on what you actually draw, plus a commitment fee on what you don't. Unlike a term loan, you only pay interest on the outstanding balance. The commitment fee (typically 0.25-0.50% per year on the undrawn portion) is the price of having the capacity available when needed.
500k credit limit with 200k average drawn over 12 months at 8% interest = 16,000 interest on drawn portion. Unused 300k × 0.25% = 750 commitment fee. Total cost 16,750. Effective rate on used capital is 8.38%, slightly higher than headline interest because of the commitment fee.
LOC is expensive when left mostly unused. A 1M facility used at 20% average has effective rates 50-80% above the headline interest rate because the commitment fee dominates cost. If utilisation stays under 30% over time, term loans sized to expected need almost tends to exceed LOC on total cost.
Run it with sensible defaults
Using credit limit of 500,000, avg balance drawn of 200,000, interest rate of 8%, unused fee of 0.25%, the calculation works out to 16,750.00. The defaults are meant as a starting point, not a recommendation.
The levers in this calculation
The inputs — Credit Limit, Avg Balance Drawn, Interest Rate %, Unused Fee %, and Months Used — do not pull with equal force.
How the math works
Interest = balance × monthly rate × months. Unused fee = (limit - balance) × unused % × months/12. Total = interest + unused fee.
What this doesn't capture
The result reflects only the inputs you provide and the assumptions built into the formula. It is a simplified model rather than a complete picture, and factors specific to your situation may matter just as much.
£500,000 limit, £200,000 drawn × 8% + 0.25% unused = $16,750.00.
Inputs
| Interest Cost | $16,000.00 |
|---|---|
| Unused Commitment Fee | $750.00 |
| Effective Rate on Used | 8.38% |
| Utilisation % | 40.00% |
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
Interest = balance × monthly rate × months. Unused fee = (limit - balance) × unused % × months/12. Total = interest + unused fee.
References
Frequently Asked Questions
LOC vs term loan?
What's the commitment fee for?
How much LOC should I get?
Can LOC rates change?
Related Calculators
Business Loan Calculator
Calculate business loan monthly repayment and the cumulative interest paid across the loan's full term at any rate and amortisation length.
Business Exit Value Calculator
Estimate your business exit value using a blended revenue and profit multiple approach with an industry growth factor applied.
Business Idea Profitability Calculator
Calculate gross profit and break-even volume for a business idea from unit economics. Enter unit revenue to see per-unit profit and break-even volume.
More Startup & VC Calculators
Startup & VC
Angel Investment Return Calculator
Calculate angel investment exit proceeds, MOIC, and IRR with dilution factored in, given initial investment and initial ownership percentage.
Startup & VC
Business Exit Value Calculator
Estimate your business exit value using a blended revenue and profit multiple approach with an industry growth factor applied.
Startup & VC
Business Idea Profitability Calculator
Calculate gross profit and break-even volume for a business idea from unit economics. Enter unit revenue to see per-unit profit and break-even volume.
Startup & VC
Business Loan Calculator
Calculate business loan monthly repayment and the cumulative interest paid across the loan's full term at any rate and amortisation length.
Startup & VC
Business Protection Calculator
Calculate business protection cover needed for key person from profit contribution, replacement time, recruitment, and loans.
Startup & VC
Business Valuation Calculator
Estimate business valuation using both an earnings-multiple approach and a net-asset approach — the two numbers usually bracket the real range.
Explore Other Financial Tools
Investing
Convertible Bond Calculator
Work out whether a convertible bond is worth more as a bond or converted into shares. Enter face value, conversion ratio and share price.
Mortgage
Mortgage vs Personal Loan Calculator
Compare cost of funding via mortgage top-up vs personal loan for the same amount. Enter amount needed and mortgage rate to see total interest of each.
Digital Nomad & Freelance
Agency vs Freelance Income Calculator
Compare net income from running an agency versus working as a freelancer. Returns net income, effective hourly rate, and the gap between the two models.
Spotted something off?
Calculations or display — let us know.