Table of Contents
- Business Line of Credit Calculator - How Much Can You Afford?
- What Is a Business Line of Credit?
- Understanding the Repayment Structure
- How Line of Credit Calculators Work
- Using Our Line of Credit Calculator
- Understanding Your Results
- Final Thoughts
Business Line of Credit Calculator - How Much Can You Afford?
When you need working capital, there are many options available to your business. In most cases, you know exactly what it’s for. You understand the scope, the timeline and every other detail necessary to make the investment a success.
But what about when a project or need is a little more fluid and undefined? This is where a business line of credit is quite valuable.
With this business line of credit calculator, you can see how affordable your credit line offer truly is.
What Is a Business Line of Credit?
A business line of credit provides your company with access to funds to spend as you need them. You withdraw the amount of funds your business needs while only paying interest against the capital you’ve used. You are never obligated to withdraw the entire credit line amount.
When your business needs recurring access to funds for a project or goal without an end date, a business line of credit could be the best solution for you.
Business lines of credit function similarly to credit cards. However, they don’t carry any annual fees. It’s also possible (depending on the lender) that you may have to re-submit the documents and paperwork, including current bank statements, whenever you want to make a withdrawal from the credit line.
Understanding Your Payments with a Business Line of Credit Calculator
Before securing any business line of credit, use a line of credit payment calculator to fully understand exactly what your business will be expected to pay. There are three specific cost factors that you need to be aware of before making any decision.
When you come to terms on a loan product, you’re given your funds all at once, along with an accompanying repayment schedule.
A business line of credit, on the other hand, only requires payment once you’ve withdrawn from your credit line. As you find with a term loan, a business line of credit will provide repayment parameters once a withdrawal is made.
Depending on the lender you’re working with, your repayment period can extend anywhere from 12 months to 10 years. While the average term is 24 months, this is all subject to your unique qualifications as well as your lender’s policies and preferences.
As we described in the previous section, interest is only applied to the funds you withdraw, not the total line of credit. Once you draw from your line of credit, your interest rate will become important to fully understand. This is where using the business line of credit calculator is helpful.
Aside from your own qualifications, where you secure your business line of credit will also impact your interest rate. Lines of credit from banks historically carry the lowest rates while alternative lenders, due to the increased risk they’re taking on, often assign higher rates.
It’s important to remember that even though a bank rate may be lower at face value, the overall interest payments over the course of the line of credit through an alternative lender could be lower. This is due to the fact that alternative lenders use a condensed term (12-24 months). You’re likely to pay less in total for the funds you use.
The most common fees attached to a business line of credit are application fees, origination fees and a draw fee (further information on all of these fees can be found on our business loan calculator page.)
Because fees aren’t folded into your interest rates, it’s important to include them when determining your overall costs. By including your estimated fees into the line of credit payment calculator, you’ll come away with a much clearer picture of how much your business will pay.
How Business Line of Credit Calculators Work
Business line of credit calculators work by calculating total loan payments with estimated APR (annual percentage rate). While it’s possible to figure these out on your own, determining repayment terms is more accurate and convenient with the help of a line of credit interest calculator.
Let’s review the factors the business line of credit calculator uses:
- The principal loan amount
- The interest rate
- The estimated number of payments
- Associated fees (origination fees, closing costs, etc.)
How to Use Our Business Line of Credit Payment Calculator
To calculate your monthly or weekly payments and the total cost over the life of your credit line, enter:
- The credit line amount found in your offer. Depending on the total amount of funds you qualify for, your business can secure between $5,000 and $500,000.
- The estimated interest rate you were quoted. Depending on your creditworthiness, interest rates for a business line of credit can be as low as 6%.
- The loan term and payment frequency. While business lines of credit may not have a set repayment schedule, your lender may require more frequent payments on a weekly, rather than monthly, basis for terms under 18 months.
- Any fees quoted with your loan.
As you can see, interest rates and APRs are just one part of the overall loan agreement. To best compare your business line of credit options, it’s important to also take into consideration the amount of time you have to pay back the line as well as any fees that could be assessed to understand the true cost of borrowing.
Understanding Your Business Line of Credit Calculator Results
Using Fast Capital 360’s business line of credit calculator, you’ll have a much clearer sense of the actual cost of financing.
- The weekly or monthly payment
- The total repayment amount
- The cost of the loan
To get a better idea of what these numbers mean to your credit line, check out how business line of credit calculators work.
With this information, it’s easy to evaluate how different credit line amounts impact your overall costs.
The Final Calculation on Business Line of Credit Calculators
As you begin the process of identifying the best business line of credit for your business, you should begin to notice how uncomplicated interest rates and APRs actually are. While fees can present an additional wrinkle when trying to lock down your total costs, it’s much easier to figure out your overall costs by using a business line of credit calculator.
While line of credit payment calculators don’t provide or replace an official offer, they’re fantastic tools to check your potential costs. Based on the information business line of credit calculators provide, you’ll have a better idea of just how much your business can secure and pay off.
Whether you’re looking for a credit line or are simply curious about what a revolving business line of credit calculator could tell you, Fast Capital 360 has the information and detail you’ve been seeking. If you still have questions about your line of credit payment calculator results, our team of expert Business Advisors will be happy to guide you.