Business Line of Credit Calculator

Available Credit Limit

Amount Currently Borrowed

Annual Interest Rate (%)

Loan Term (Years)

Understanding Your Business Line of Credit

A business line of credit (LOC) is a flexible financing option that provides your business with access to a set amount of capital that you can draw from as needed. Unlike a traditional loan where you receive a lump sum, a line of credit acts more like a credit card for your business. You are approved for a maximum credit limit, and you can borrow funds up to that limit, repay them, and then borrow them again. This makes it an excellent tool for managing cash flow, covering unexpected expenses, or seizing time-sensitive opportunities.

How it Works:

When you draw funds from your line of credit, you only pay interest on the amount you've actually borrowed, not the entire credit limit. As you repay the borrowed amount, that capital becomes available to be drawn again. Most lines of credit have a 'draw period' during which you can access the funds, followed by a 'repayment period' where you focus on paying down the principal and interest.

Key Terms to Understand:

Available Credit Limit: The maximum amount of money you can borrow at any given time.
Amount Currently Borrowed: The portion of your credit limit that you have already drawn and are currently using.
Annual Interest Rate: The percentage charged on the outstanding balance of your line of credit over a year. This is usually a variable rate tied to a benchmark rate.
Loan Term: The duration for which the line of credit is available or the period over which outstanding balances must be repaid.

Why Use This Calculator?

This calculator helps you estimate the potential costs associated with using your business line of credit. By inputting your available limit, how much you plan to borrow, the annual interest rate, and the term, you can get an idea of the total interest you might pay. This information is crucial for budgeting and understanding the true cost of utilizing your line of credit for short-term financing needs.

Example Calculation:

Let's say your business has an Available Credit Limit of $50,000. You need to draw $30,000 to cover some seasonal inventory. The Annual Interest Rate on your line of credit is 8.5%, and you expect to repay the borrowed amount over 1 year (Loan Term). The Amount Currently Borrowed is $10,000. This calculator will help you understand the interest implications.

var calculateLineOfCredit = function() { var availableCreditLimit = parseFloat(document.getElementById("availableCreditLimit").value); var amountBorrowed = parseFloat(document.getElementById("amountBorrowed").value); var interestRatePerYear = parseFloat(document.getElementById("interestRatePerYear").value); var loanTermInYears = parseFloat(document.getElementById("loanTermInYears").value); var resultElement = document.getElementById("result"); resultElement.innerHTML = ""; // Clear previous results if (isNaN(availableCreditLimit) || isNaN(amountBorrowed) || isNaN(interestRatePerYear) || isNaN(loanTermInYears) || availableCreditLimit < 0 || amountBorrowed < 0 || interestRatePerYear < 0 || loanTermInYears availableCreditLimit) { resultElement.innerHTML = "Amount borrowed cannot exceed the available credit limit."; return; } var monthlyInterestRate = interestRatePerYear / 100 / 12; var totalInterestPaid = 0; // Simple interest calculation for the term, assuming consistent borrowing // In reality, lines of credit often have variable repayment and interest accrual. // This provides an estimate based on the initial borrowing amount for the term. totalInterestPaid = amountBorrowed * monthlyInterestRate * loanTermInYears * 12; var remainingCredit = availableCreditLimit – amountBorrowed; resultElement.innerHTML = "

Estimated Costs:

" + "Amount Available to Draw: $" + remainingCredit.toFixed(2) + "" + "Estimated Total Interest Paid Over " + loanTermInYears + " Year(s): $" + totalInterestPaid.toFixed(2) + ""; };