To show you how payments may be calculated for a business line of credit, let’s consider an example.
If the annual interest rate is 7.5% and the month in question is July (31 days), you need to divide 7.5% by 365 and multiply by 31. This will give you a monthly interest of 6.37%.
To figure out the average balance for new purchases, imagine that you made one purchase of $300 on the 10th of the month and another for $200 on the 20th of the month.
21 x 200/31 = 135.48
11 x 300/31 = 106.46
Add these together to give an average daily balance for new purchases of $241.94.
To compute the average daily balance (overall), add the amount you just calculated to the opening balance. If you had an initial balance of $1,000 and a new average balance of $241.94, your average daily balance will now be $1,241.94. You would then need to multiply this amount by the previously calculated interest rate of 6.37% to give you an interest amount for that month of $79.11.
Try the Lendzero Line of Credit calculator to estimate your potential payment
