Price the drawn balance, not the limit
A revolving line gives access to a maximum amount, but interest normally follows the outstanding draw. If your limit is $100,000 and you borrow $30,000, a balance based interest charge applies to $30,000, not the unused $70,000. Separate facility charges can still attach to the limit or availability. Read which number each charge uses before multiplying a percentage by anything.
Make a calendar of expected draws and repayments. A business buying seasonal inventory may carry a large balance briefly and nothing for the rest of the year. Another business may keep the same balance outstanding continuously. Even with identical rates and limits, their dollar costs differ. An average balance is useful for a rough budget, but dated cash flows produce a better annual cost calculation.
A published minimum is not your rate
Wells Fargo describes its BusinessLine rate as low as prime + 1.75%. That is a published minimum spread, not a full borrower rate range and not a promise that an applicant qualifies. This site retains prime at 7.00% as of 16 September 2026. Combining that assumption with the published minimum spread gives 8.75%. Actual offered pricing can be higher, and a floating rate can change after opening.
The same page lists annual fees of $95 for lines from $10,000 through $25,000 and $175 for larger lines, with a first year waiver. It also lists no fees for checks, transfers and Bill Pay. Those facts do not establish that every transaction channel or every credit line is free. Check the full fee schedule and distinguish a transfer from a cash advance or another separately priced transaction.
Draw charges and maintenance fees alter the comparison
A percentage draw fee is charged when money is accessed. If charged again on every draw, it can penalize frequent small withdrawals. An annual maintenance charge behaves differently: once it is paid, using the line more does not necessarily increase that particular fee. An unused commitment fee can reverse the usual intuition by charging for capacity you do not use.
Do not attach one bank’s minimum rate to another provider’s fee schedule and call the result an offer. Build a complete schedule from a single proposed agreement, then compare it with a complete schedule from another. The hypothetical calculation below isolates a draw and an annual fee so the cost mechanics are visible without claiming those terms form a currently available package.
Published references and hypothetical cost ranges
Wells Fargo references apply to its named product. Draw fee scenarios are hypothetical and show sensitivity, not an asserted market range. Interest uses a 360 day convention solely for illustration; the agreement determines the actual convention.
| Cost item | Amount or range | What it means |
|---|---|---|
| Published minimum spread | Prime + 1.75% | BusinessLine minimum advertised spread. Qualification and current index determine actual pricing. |
| Published annual fee | $95 to $175 | BusinessLine amounts after the stated first year waiver, depending on the credit limit. |
| Hypothetical draw fee | $0 to $300 | Illustrates a $30,000 draw with an assumed fee of 0% to 1%; not verified provider pricing. |
| 90 day interest | $656.25 calculated | A $30,000 unchanged balance at an assumed 8.75% using 90 ÷ 360. |
| 90 day all in cost | $656.25 to $831.25 | Interest plus $0 to $175 of fees in the worked example. A draw fee would be additional. |
Worked example: $30,000 for 90 days
Hypothetical example: borrow $30,000, leave principal outstanding for 90 days and pay interest and principal together at the end. Assume 8.75%, no draw fee and a 360 day interest year. Compare no allocated facility fee with charging the full assumed $175 annual fee to this single use.
- Interest = $30,000 × 0.0875 × (90 ÷ 360) = $656.25. Final payment without the fee = $30,656.25.
- If a $175 facility fee is paid at funding, initial net cash benefit = $30,000 less $175 = $29,825. The contractual principal can still be $30,000.
- Total cost with that fee = $656.25 + $175 = $831.25. Compare $656.25 to $831.25, not just the stated interest rate.
- For this single final payment, the 90 day cash flow return = $30,656.25 ÷ $29,825, less 1 = about 2.7871%.
- Simple annualized cash flow rate on a 365 day basis = 2.7871% × (365 ÷ 90) = about 11.30%. Without the fee it is about 8.87%, because interest used a 360 day year.
- Compounded effective annual rate = ($30,656.25 ÷ $29,825) raised to (365 ÷ 90), less 1 = about 11.79%. Without the fee, the comparable compounded figure is about 9.17%.
This annualization is a comparison of the stated hypothetical cash flows, not a universal regulatory APR for a revolving account. Many actual lines collect interest monthly and use a different day count. Those payments change the timing and therefore the cash flow rate. Use the actual schedule when comparing formal disclosures.
Allocating the entire annual fee to one draw can overstate the incremental cost of a later draw after that fee is already paid. It can still be appropriate when deciding whether to open the line for only one use. Keep the question explicit: the cost of maintaining access is not always the same as the extra cost of borrowing today.
What drives the cost up or down
Utilization changes fee impact. A fixed annual fee divided by a small borrowed amount produces a larger percentage cost than the same fee spread across substantial use. That does not mean borrowing unnecessarily makes sense. It means a fee heavy facility may be poor value when the business rarely needs it.
Payment speed matters. Repaying principal reduces future balance based interest, but repeated draws can trigger repeated transaction charges. Compare a plan with fewer larger draws against frequent small ones only if both fit operating needs. Do not assume a smaller daily balance automatically offsets every new draw fee.
Floating rate terms matter. Identify the reference index, spread, reset date and floor. A floor can keep your rate from falling even when the index declines. A prime change does not alter the published spread, but it can alter the total interest rate. Budget more than one index scenario without presenting it as a forecast.
Renewal and collateral obligations can create expenses beyond interest. Financial reporting, inventory checks, lien releases or an annual review may be required under a particular agreement. There is no verified universal fee for those activities here. Ask for the complete schedule and record unknown costs separately rather than pretending they are zero.
Frequently asked questions
Do I pay interest on the unused limit?
Usually balance based interest applies to money drawn, but an unused commitment or facility fee may apply separately. Read the fee definition and calculation base. The word unused does not mean free, and the word interest does not describe every possible charge.
Is prime + 1.75% the rate everyone receives?
No. It is Wells Fargo’s published minimum spread for a named product, not an industry average or a qualification guarantee. Using this site’s prime assumption produces 8.75% before fees. Confirm both your approved spread and the current contractual index.
Can I compare a line with a merchant cash advance?
Yes, if you compare the same net funding need and actual payment timing. A line can reduce interest when principal is repaid; a fixed repayment purchase may not reduce its total finance charge. A factor rate alone is not comparable to a line’s annual rate.
Should a fee already paid count in a new draw decision?
It belongs in the cost of maintaining the facility, but not necessarily in the incremental cost of the next draw. Show both perspectives if needed. Do not count the same annual fee in full for every draw and then add those totals together.
Why is the example annual rate above 8.75%?
The fee reduces net cash received, and the example calculates interest with a 360 day year before annualizing over 365 days. Payment timing also matters. These conventions are disclosed so the result can be checked rather than presented as a hidden adjustment.
Calculators and product details
- Compare the cost of invoice factoring
- Compare a merchant cash advance
- Business line of credit product costs
Calculator results are educational estimates, not quotes. Check whether the payment timing, fee treatment and repayment structure match your document before comparing a result with a disclosed APR. Our methodology explains the existing models and their limitations.
Related guides
Sources
These primary sources support the rules and product mechanics discussed above. Hypothetical examples are our calculations from explicitly stated assumptions, not published offers. Pricing and program schedules change; verify the current document before relying on any figure.
- Wells Fargo: BusinessLine pricing: Published minimum spread and annual fees checked in October 2026. This is a source, not a recommendation or referral.
- Federal Reserve: H.15 selected interest rates: Primary reference for checking published bank prime. This guide preserves the site assumption rather than asserting independent verification of its date.
- New York DFS: commercial financing disclosure regulation: Official explanation of finance charge, APR and disclosure requirements for different commercial financing structures.
- CFPB: Regulation Z APR determination: Federal APR framework referenced by commercial disclosure rules; scope and transaction conventions matter.