Calculate your monthly interest and facility fee costs on a business line of credit. See how costs change at different utilisation levels and compare against a term loan.
on $50,000 drawn (50% utilisation)
| Utilisation | Drawn | Monthly interest | Monthly fee | Total / month |
|---|---|---|---|---|
| 25% drawn | $25,000 | $166.67 | $83.33 | $250.00 |
| 50% drawn(current) | $50,000 | $333.33 | $83.33 | $416.67 |
| 75% drawn | $75,000 | $500.00 | $83.33 | $583.33 |
| 100% drawn | $100,000 | $666.67 | $83.33 | $750.00 |
Comparing the monthly cost of your current LOC draw ($50,000) against a 5-year term loan for the same amount at 8% p.a.
| Structure | Monthly cost | Includes principal? | Flexibility |
|---|---|---|---|
| Line of credit | $416.67 | No | Draw and repay freely |
| Term loan (5yr) | $1,013.82 | Yes — paid off in 5 years | Fixed schedule |
Your LOC costs $597.15/month less than a term loan — but with no principal repayment, the balance remains. A LOC is best for short-term or variable needs.
Drawing only 25% of your facility keeps monthly interest low while maintaining headroom for unexpected expenses. The facility fee is the same regardless, so your cost per dollar drawn is higher at low utilisation.
Many businesses maintain around 50% utilisation, balancing available headroom with the cost of carrying an unused facility. This level gives a realistic picture of ongoing monthly costs.
At 75% drawn, the interest cost dominates your total monthly expense. If you are consistently above 75%, a term loan for the base amount with a smaller LOC on top may be cheaper.
Drawing the full facility means paying interest on the entire limit plus the facility fee. At this point, compare the total cost against a term loan — the term loan includes principal repayment but may have a lower total cost of funds.
You only pay interest on the funds you actually draw from the facility, not on the total approved limit. This makes a LOC cost-effective when utilisation fluctuates.
Most lenders charge an annual facility fee on the entire approved limit — whether you draw $0 or the full amount. This is the cost of having the facility available.
As you repay drawn funds, those funds become available to draw again. Unlike a term loan, there is no fixed repayment schedule — you manage the balance.
Most facilities are reviewed annually. The lender may adjust the limit, rate, or terms based on your business performance. Some facilities are on-demand (callable at any time).
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A business line of credit gives you an approved facility limit you can draw on as needed. You only pay interest on the amount you have drawn, not the full limit. As you repay the drawn balance, those funds become available to draw again. A facility fee (typically 0.5-2% per annum) applies to the total approved limit regardless of how much you have drawn.
A line of credit is a standalone revolving facility with its own account. An overdraft is attached to your existing business bank account and lets you spend beyond your balance up to an agreed limit. Overdrafts are simpler to set up but typically carry higher interest rates and lower limits than a dedicated line of credit.
In Australia, business line of credit interest rates typically range from 7% to 12% per annum on drawn balances, depending on the lender, your business financials, and whether the facility is secured. On top of the interest rate, most lenders charge an annual facility fee of 0.5% to 2% on the total approved limit.
A line of credit suits variable, short-term cash flow needs — covering payroll gaps, seasonal stock purchases, or unexpected expenses. A term loan is better when you need a defined amount for a specific purpose (buying equipment, fitting out premises) and want fixed repayments over a set period.
It is difficult. Most lenders require at least two years of trading history and demonstrated cash flow. If your business is newer, alternatives such as invoice finance, a business overdraft, or revenue-based finance may be more accessible.
Yes. Interest charged on a business line of credit is generally a deductible business expense, as is the facility fee. As always, confirm with your accountant based on your specific circumstances.
Results are estimates only and should not be relied upon for financial decisions. Actual line of credit repayments will depend on the lender, your credit profile, and the specific terms offered. Interest rates used are for illustration purposes only and may not reflect current market rates.
Subject to lender approval, terms and conditions apply.
This calculator is general information only and is not financial advice.