How a business credit line is priced
A business credit line lets you draw money up to a limit and pay interest only on what you have drawn. This calculator takes the amount drawn, not the limit, and shows the payments under four ways of repaying: interest only, interest only for a draw period and then equal payments, equal payments over the whole term, or a percentage of the balance each month.
The APR convention choice sets how the yearly rate becomes a monthly rate. Effective APR (FCA), the default, uses (1 + rate)^(1/12) − 1, the effective-rate basis the FCA sets for APR calculations. APR divided by 12 is how many UK sites work: on the default £25,000 at 12%, the interest-only payment moves from £237.22 to £250.00 a month and the equal payment that follows from £961.48 to £968.70. Fees, the credit limit and changes to the rate are not modelled. In the UK the nearest products to a US-style line of credit are a business overdraft, a revolving credit facility and a drawdown loan, so check what your lender calls the product and how it prices it.
Worked example: £25,000 at 12% for 36 months
Drawing £25,000 at 12% with 6 months of interest only and then equal payments over the other 30 months, you pay £237.22 a month at first and £961.48 a month after that. Over the 36 months the interest is £5,267.84 and you pay £30,267.84 in total.
With equal payments from the start, the payment is £823.05 a month and the interest is £4,629.87. Interest only for the whole term costs £237.22 a month and £8,539.91 of interest over 36 months, but you still owe the full £25,000 at the end.
A percentage of the balance
Some lines ask for a percentage of the balance each month. At 2% of £25,000 the first payment is £500.00, and after 36 months you still owe £17,089.59. At 12% a year the monthly interest is about 0.95% of the balance, so a percentage below that leaves the balance growing; the calculator then shows a warning.
What this calculator leaves out
It leaves out arrangement and renewal fees, commitment fees on the unused limit, variable rates and security. The yearly rate you enter should be the rate on the amount drawn. A lender's representative APR may include charges and use different assumptions, so compare offers on their stated terms.
To price a fixed-term business loan with fees and an APR, use the business loan calculator.
To price a flexible loan with a monthly rate and early settlement, use the flexi loan calculator.
Use the right country page
This page uses pounds and the UK convention for turning a yearly rate into a monthly rate. The country choices above the inputs open separate local pages. Choosing United States opens the US business line of credit calculator, which works in dollars and divides the APR by 12. Inputs reset and amounts are not converted.
Inputs for the business line of credit loan calculator
APR convention
Effective APR (FCA) is the default and follows the FCA APR rule. APR divided by 12 is how many UK sites work and gives a slightly higher monthly rate.
Amount drawn
The amount you have used, not the credit limit. Interest is charged on this.
Interest rate
The yearly rate on the amount drawn, from your offer.
How you repay
Choose how the payment is set. The fields below say which options use them.
Term
The months to model. A whole number up to 600.
Interest-only months
Used for interest only, then equal payments. Must be fewer than the term.
Percentage of the balance
Used for a percentage of the balance. Take it from the lender's terms.
CALCULATOR QUESTIONS
UK business line of credit loan calculator questions
What does a business line of credit cost?
Interest on the amount drawn, plus any fees. On £25,000 at 12% the interest is £5,267.84 over 36 months with 6 interest-only months and equal payments after.
What is the difference between interest only and equal payments?
Interest only is £237.22 a month on £25,000 but leaves the full balance. Equal payments over 36 months are £823.05 a month and clear it.
How does a draw period work?
You pay only interest for the draw period, then repay the balance in equal payments. Here that is £237.22 a month for 6 months and £961.48 a month for the other 30.
Is this a fixed-term loan calculator too?
It shows a fixed-term loan for comparison: £823.05 a month and £4,629.87 of interest for the same amount, rate and term.
Why is there a warning for a percentage of the balance?
If the percentage you pay is lower than the monthly interest rate, the balance grows instead of falling.