A business line of credit typically carries a mix of interest and separate fees, and the fees are where the real cost often hides: expect some combination of an origination fee (commonly a percentage of the credit limit charged once), per-draw fees on each withdrawal, an annual or monthly maintenance fee, and situational charges such as inactivity, late-payment, and returned-payment fees. Interest is only charged on the balance you actually draw, but many of these fees apply whether or not you borrow a dollar. The total you pay depends less on the advertised rate and more on how these fees stack together for your specific usage pattern, so the smartest move is to price the whole schedule before you sign, not just the headline APR.
Key takeaways
- Interest is charged only on the balance you draw, but most other fees apply whether or not you borrow.
- Origination fees are usually a percentage of the total credit limit (commonly 1%–3%, for example), charged once at opening.
- Per-draw fees apply to every withdrawal, so consolidating into fewer, larger draws can cut costs, especially if the fee has a flat minimum.
- Compare APR, not the advertised rate, since APR folds mandatory fees into one annualized cost figure.
- Situational fees, late, returned-payment, inactivity, renewal, and limit-increase charges, are often overlooked and never appear in the headline rate.
- Revenue-based lines and advances lean on bank-deposit history and monthly revenue, can approve FICO 500+, and often fund in 24–48 hours, with minimums around $10,000.
- Maintenance and origination fees are the most negotiable; approval on any product is never guaranteed.
The full fee menu, at a glance
Lenders rarely bundle everything into one number. A revolving line can carry a dozen distinct charges, and not every lender uses every one. Below is the complete menu you may encounter, grouped by when it hits.
| Fee | When it applies | Typical structure (for example) |
|---|---|---|
| Origination / setup fee | Once, at account opening | 1%–3% of the credit limit, e.g. $300 on a $15,000 line |
| Draw / advance fee | Each time you withdraw funds | 1%–3% of the draw, e.g. $60 on a $2,000 draw |
| Annual / maintenance fee | Yearly or monthly, ongoing | $0–$250 per year, or roughly $10–$25 per month |
| Inactivity fee | After months of non-use | Flat monthly charge after 6–12 dormant months |
| Late-payment fee | When a payment misses its due date | Flat fee or a percentage of the past-due amount |
| Returned-payment (NSF) fee | When a payment bounces | Flat fee per failed transaction, e.g. $25–$40 |
| Prepayment fee | When you pay off early (less common on lines) | Usually none, but check term-loan-style products |
| Credit-limit-increase fee | When you request a higher limit | Percentage of the increase, or flat re-underwriting fee |
| Wire / expedited funding fee | When you want same-day cash | Flat fee per wire, e.g. $15–$35 |
| Renewal fee | When the line renews annually | Flat or percentage-of-limit charge |
Not every line has all of these, and that is exactly the point: two lines with identical interest rates can cost hundreds of dollars apart once the fee schedule is layered in.
The one-time and recurring fees you cannot avoid
Some fees hit regardless of how carefully you use the line. The origination fee is charged once when the account is opened and is usually a percentage of the total credit limit, not the amount you borrow. That means a larger approved limit can cost more upfront even if you never touch most of it, so there is little reason to accept a bigger line than you will realistically use.
The annual or maintenance fee is the recurring cost of simply keeping the line open. Lenders frame it either as a single yearly charge or a smaller monthly one; the monthly version often adds up to more over a year, so convert both to an annual figure before comparing. Many lenders waive the maintenance fee for the first year or for borrowers who maintain a certain balance or draw volume, and that waiver is frequently negotiable if your revenue and deposit history are strong.
Usage fees: what each draw really costs
The draw fee is the charge most business owners underestimate. Because it applies to every withdrawal, a habit of taking many small draws can quietly become expensive. Consolidating your borrowing into fewer, larger draws is the simplest way to cut this cost.
Here is how the same $10,000 of total borrowing costs differently depending on draw behavior, assuming a 2% draw fee (for example):
| Draw pattern | Number of draws | Draw-fee cost (2%, for example) |
|---|---|---|
| One lump withdrawal | 1 × $10,000 | $200 |
| Two mid-size draws | 2 × $5,000 | $200 |
| Frequent small draws | 10 × $1,000 | $200 |
The percentage is flat, so the fee is the same on the same total in this simplified example, but the practical lesson holds: if a lender charges a flat minimum draw fee (say, the greater of 2% or $50), those ten small draws would cost $500 instead of $200. Always read whether the draw fee has a floor.
The situational fees Lendio-style guides often skip
Most fee guides stop at origination, draws, maintenance, inactivity, and interest. But a full accounting includes the charges that only appear when something goes sideways, and these are often the ones that sting.
- Late-payment fee: triggered when a payment misses its due date; can be a flat amount or a percentage of what is past due, and repeated lateness can also trigger a rate increase.
- Returned-payment / NSF fee: charged when an automatic payment bounces for insufficient funds, on top of whatever your bank charges.
- Credit-limit-increase fee: some lenders re-underwrite and charge when you ask for more room.
- Renewal fee: revolving lines often renew annually, and a few lenders attach a charge to that renewal even if nothing else changes.
- Wire or expedited-funding fee: the cost of same-day cash versus a free next-day ACH transfer.
- Prepayment consideration: true revolving lines rarely penalize early payoff, which is a genuine advantage over many term products, but always confirm, because some hybrid products carry minimum-interest or early-termination clauses.
None of these show up in the advertised rate. Asking for the complete fee schedule in writing is the only reliable way to surface them.
Fees versus interest: how to read the true cost
Interest and fees are different animals. Interest accrues only on your outstanding balance and only for as long as you carry it; fees can apply whether or not you borrow. That is why a low interest rate paired with heavy fees can cost more than a slightly higher rate with a clean schedule.
The tool that combines both is APR (annual percentage rate), which folds mandatory fees into a single annualized cost figure. When you can get it, compare APRs rather than nominal rates. When a lender quotes a simple interest rate or a factor rate instead, ask them to express the total cost as an APR for your expected draw and repayment schedule so you are comparing like with like. Two lines can advertise the same rate and land far apart once origination and maintenance fees are annualized into the APR.
How fees look on a revenue-based line or advance
If your credit score or time in business makes a traditional bank line hard to qualify for, a revenue-based line of credit or merchant cash advance sourced through a marketplace can be a faster route. These products lean on your bank-deposit history and monthly revenue more than your FICO score, which is why many approve applicants with a score of 500 or higher, often with funding in as little as 24 to 48 hours.
The trade-off is a different cost structure. Instead of a traditional APR, these are frequently priced with a factor rate or fee-based repayment, so the same discipline applies: ask for the total dollar cost and the effective APR, confirm whether there is an origination or draw fee, and check for early-repayment terms. Because a marketplace shops your file to multiple funders at once, you can compare several fee schedules from a single application rather than guessing. Minimums typically start around $10,000, and approval is never guaranteed, so treat any offer as a quote to be compared, not a foregone conclusion.
| Feature | Bank line of credit | Revenue-based line / advance (marketplace) |
|---|---|---|
| Primary approval basis | Credit score, financials, time in business | Bank-deposit history and monthly revenue |
| Typical minimum credit score | Often 660+ | 500+ |
| Funding speed | Days to weeks | Often 24–48 hours |
| Typical minimum amount | Varies | Around $10,000 |
| Cost expressed as | APR / interest + fees | Factor rate or fee-based; ask for effective APR |
Seven questions to ask before you sign
Before accepting any line, get answers to these in writing. They surface the fees that advertised rates hide.
- Is there an origination fee, and is it a percentage of the limit or the amount drawn?
- Is there a per-draw fee, and does it have a flat minimum (a floor)?
- What is the annual or monthly maintenance fee, and can it be waived?
- Is there an inactivity fee, and after how many dormant months does it start?
- What are the late-payment and returned-payment fees?
- Are there charges for credit-limit increases, renewals, or wire transfers?
- Can you show me the total cost as an APR for my expected usage?
A lender who answers all seven clearly is one you can compare honestly against the next.
Frequently asked questions
What is the most common fee on a business line of credit?
The most common recurring charges are the annual or monthly maintenance fee for keeping the line open and, on many lines, a per-draw fee each time you withdraw. A one-time origination fee at opening is also widespread. Which one costs you most depends on your usage: heavy borrowers feel draw fees, while occasional users feel maintenance and inactivity fees.
Are business line of credit fees charged even if I do not use the line?
Often, yes. Origination fees are charged at opening regardless of use, maintenance fees recur whether or not you borrow, and inactivity fees are specifically triggered by not using the line for a set period (commonly 6 to 12 months). Interest is the main cost that applies only when you actually carry a balance.
How much is a typical origination fee?
As a rough example, origination fees commonly fall in the range of 1% to 3% of the total credit limit and are charged once. On a $15,000 line, a 2% fee would be about $300. Because it is usually tied to the limit rather than what you draw, accepting a larger line than you need can raise this upfront cost.
Can business line of credit fees be negotiated?
Some can. Maintenance and origination fees are the most frequently waived or reduced, especially for borrowers with strong revenue and consistent bank-deposit history. It is reasonable to ask a lender to waive the first year's maintenance fee or reduce origination in exchange for your business. Situational fees like late or returned-payment charges are rarely negotiable.
Do revenue-based lines of credit have fees too?
Yes, though the structure differs. Rather than a traditional APR, revenue-based lines and advances are often priced with a factor rate or fee-based repayment and may still carry origination or draw fees. Because approval leans on bank-deposit history and monthly revenue rather than credit score, they can fund quickly, often in 24 to 48 hours, but you should always ask for the total dollar cost and effective APR before accepting.
How do I compare the true cost between two lines of credit?
Convert everything to an annualized figure. Ask each lender for the APR that includes mandatory fees for your expected draw and repayment pattern, not just the nominal interest rate. Two lines with the same advertised rate can differ by hundreds of dollars once origination, maintenance, and draw fees are folded in.
Is there a prepayment penalty on a business line of credit?
True revolving lines rarely penalize early repayment, which is one of their advantages over many term loans. However, some hybrid or advance-style products carry minimum-interest or early-termination clauses, so confirm in writing before assuming you can pay down the balance for free.
What credit score do I need to qualify for a line of credit?
Traditional bank lines often look for a score around 660 or higher along with solid financials and time in business. If your score is lower, a revenue-based line or advance sourced through a marketplace may approve applicants with a FICO of 500 or higher, since those products weigh monthly revenue and bank-deposit history more heavily. Approval is never guaranteed, and minimums typically start around $10,000.
