Fees are one of the most important (and overlooked) factors in the total cost of a business line of credit.

Business line of credit fees are the charges a lender applies beyond the principal you borrow: they cover the cost of opening the account, maintaining access, and drawing funds. Common fee types include: origination fees, draw fees, annual or maintenance fees, inactivity fees, and interest. Understanding each one before you borrow gives you the clearest picture of what financing will actually cost.

Why these fees matter.

A business line of credit offers flexible, ongoing access to capital. But that flexibility carries a cost structure that works differently from a standard term loan. With a term loan, you receive a lump sum and repay it on a fixed schedule. With a line of credit, your costs shift every time you draw, and fees can compound quickly if you’re not tracking them.

A 2% draw fee on $20,000 adds $400 to your cost before interest applies. Make several draws per quarter, and that fee structure becomes as consequential as the interest rate itself. Knowing what you’ll be charged, and when, helps you make smarter decisions about using your credit line.

How each business line of credit fee works.

Origination fees

An origination fee is a one-time charge applied when a lender opens your line of credit. It typically ranges from 1% to 3% of your total credit limit. On a $100,000 credit line, that's $1,000 to $3,000 due at opening — before you access any funds.

Not all lenders charge origination fees. Some waive them for returning borrowers with a strong track record. It's worth asking about this directly during underwriting.

What it is: A one-time setup charge applied at account opening.‍

Why it matters: It raises your effective borrowing cost from day one, regardless of how often you draw.

What you can do: Compare lenders — origination fees vary significantly across banks, credit unions, and online lenders, and some products don't charge them at all.

Draw or Advance fees

Every time you access funds from your line of credit, you're making a draw. Some lenders charge a fee per draw, usually calculated as a percentage of the amount accessed — typically up to 3%.

On a $15,000 draw with a 2% draw fee, you'd pay $300 immediately, making the actual cost of that transaction $15,300 before interest. The more frequently you borrow, the more those per-draw costs accumulate.

What it is: A per-transaction charge applied each time you access your credit line.

Why it matters: Small, frequent draws carry higher relative costs than larger, occasional ones.

What you can do: Where possible, consolidate draws — and factor the draw fee into your minimum viable draw amount when planning cash flow.

Annual or maintenance fees

Many lenders charge an annual fee to keep your line of credit open, regardless of whether you use it. These fees are typically under $200 per year. Bank of America charges an annual fee of $150 (waived in the first year). Wells Fargo's BusinessLine product charges $95 to $175 per year depending on your credit limit. Some lenders charge monthly maintenance fees instead — OnDeck, for instance, charges a $20 monthly maintenance fee on certain products.

What it is: A recurring fee for maintaining access to the credit line.

Why it matters: It creates an ongoing cost even during months when your balance is zero.

What you can do: Annualise maintenance costs and include them in your lender comparison — a lower interest rate paired with a high annual fee may not be the better deal.

Inactivity fees

If you don't use your line of credit for an extended period (typically six months to a year) lenders may classify the account as dormant and charge an inactivity fee. These are usually fixed monthly charges applied for each month the account remains unused.

Inactivity fees exist to offset the cost of maintaining a credit line that isn't generating revenue for the lender. If you're keeping a line of credit as an emergency reserve and rarely drawing from it, inactivity fees can erode the value of that safety net over time.

What it is: A fixed monthly charge for accounts that go unused past the lender's dormancy threshold.

Why it matters: They create a recurring cost for businesses holding a credit line in reserve.

What you can do: Review your credit agreements inactivity clause and set a reminder to make a small draw before the dormancy period triggers.

Interest and APR

Interest is the ongoing cost of any outstanding balance on your line of credit. Most business lines of credit carry variable interest rates, meaning your rate moves in line with a benchmark like the Prime Rate (6.75% as of March 2026) or SOFR. Lenders set your specific rate based on your credit profile, business revenue, and whether the line is secured or unsecured.

Typical business line of credit rate ranges as of 2026:

  • Secured line of credit, established business with strong credit: 7%–12%
  • Unsecured line of credit, established business with good credit: 10%–20%
  • New or small business with limited credit history: 15%–36%+
  • SBA line of credit (as of March 2026): Starting at 11.75%

Interest is calculated using the average daily balance method:

(APR / 365) x number of days in the billing cycle x average daily balance

This means you're only charged interest on what you've actually borrowed — not the full credit limit. Keeping your balance low between draws is one of the most effective ways to manage interest costs over time.

The APR (annual percentage rate) gives the most complete view of your borrowing cost because it incorporates applicable fees alongside the interest rate. When comparing lenders, compare APRs — not interest rates alone.

What it is: The cost of carrying an outstanding balance, expressed as a variable annualized percentage.

Why it matters: Even a small rate difference compounds significantly across large balances or longer draw periods.

What you can do: Use a business loan calculator to model total interest costs across different draw scenarios before committing to a product.

Example: the true cost of a single draw.

Here’s how fees stack up on a typical draw from a line of credit:

Item Amount
Draw amount $20,000
2% draw fee $400
Interest (15% APR, 30-day billing cycle) ~$246
Total cost for one draw, one month $646

If you made this same draw four times per year, your fee and interest costs would reach approximately $2,584, before accounting for any annual maintenance fees. The takeaway isn’t that lines of credit are expensive, however. It’s that usage patterns determine cost more than rate alone. Larger, less frequent draws tend to be more efficient than small, regular ones.

Where these fees appear in other financing products.

Business line of credit fees don’t exist in isolation. Similar charge structures appear across other revolving credit products, which is useful context when you’re comparing your options:

  • Business credit cards also carry annual fees and interest, typically at higher rates of 20%-30%, along with cash advance fees that function similarly to draw fees.
  • SBA lines of credit carry government-backed rates but still include origination and servicing charges.
  • Invoice financing and merchant cash advances use factor rates and advance percentages instead of traditional interest and fees. This is a different structure that serves a similar cost function.

Understanding how fee structures differ by product type helps you match the right financing type to your actual usage pattern, rather than optimizing for rate alone.

Common misinterpretations.

  • “The interest rate is the total cost of my line of credit.” The interest rate is one component. Origination fees, draw fees, and annual maintenance fees all contribute to the true cost of financing. The APR gives a fuller picture, but even APR doesn’t always capture per-draw charges. Model your expected usage pattern, not just the rate, when comparing lenders.
  • “I’m not paying anything if I’m not drawing.” Annual fees and inactivity fees mean you may be paying for access even during months when your balance is zero. Treat the annual cost of maintaining the line as a baseline, then layer usage costs on top.
  • “A variable rate is always riskier than a fixed rate.” Variable rates can decrease as benchmark rates fall, something a fixed rate product won’t do. In a declining rate environment, a variable-rate line of credit can cost less over time. The risk is real, but it’s directional, not inherently worse.‍
  • “Draw fees are negligible.” On large, infrequent draws, the percentage impact is relatively small. On small, frequent draws (which is how many businesses actually use a line of credit), draw fees can add thousands of dollars per year in costs that compound with interest.

Summary & Key takeaways.

A business line of credit is a flexible, powerful financing tool, but its real cost depends on how you use it, not just the rate you're quoted. The fees that matter most are:

  • Origination (one-time at opening) 
  • Draw fees (per transaction)
  • Annual or maintenance fees (recurring)
  • Inactivity fees (triggered by non-use)
  • Interest (charged on outstanding balances at variable rates tied to benchmarks like Prime)

Frequent small draws are more expensive per dollar borrowed than occasional larger ones. Carrying balances across billing cycles compounds interest. And ongoing fees accrue whether you're actively drawing or not.

Before you commit to a product, compare lenders on APR, model your expected usage pattern, and read the fee schedule in full. The business owner who understands their cost structure makes better decisions, and spends less over time.