How line-of-credit draw rates really work

Draw rates confuse a lot of owners, mostly because they're quoted differently than the loan rates people are used to. Here's the whole idea in one sentence: you pay interest only on the money you've drawn, only for the days you hold it. Everything else follows from that.

It's the drawn balance that matters

Your limit is just a ceiling. If you have a $250,000 line and you've drawn $50,000, interest accrues on $50,000 — not $250,000. The other $200,000 sits available and costs you nothing until the moment you draw it.

A worked example

Say your draw rate works out to about 1.1% a month. Draw $50,000 and hold it for a full month, and interest is roughly $550. Repay after two weeks instead, and you'd owe closer to half that, because you only held the balance half as long. Never draw at all, and the line costs you nothing — there's no fee for simply having it open.

Why this structure rewards discipline

Because the meter only runs on drawn dollars, the cheapest way to use a line is to draw precisely what you need, when you need it, and repay as soon as the cash comes back. That's very different from a loan, where the interest clock runs on the full amount regardless of what you do.

When you apply, we'll show you the actual rate for your business and walk through a couple of real scenarios, so there are no surprises before you ever draw a dollar.