What is a draw period on a business line of credit?

A draw period is the window during which you can borrow against your credit line. It typically runs from 6 months to 5 years depending on the lender and facility type. Once the draw period ends, the line enters repayment phase - you can no longer take new draws and must repay the outstanding balance, either in installments or as a lump-sum balloon payment.

What fees should I expect on a business line of credit?

Expect an annual or origination fee ($0 to $2,500+), a possible draw fee (1-3% per draw), a monthly maintenance fee ($25-$75 even when not drawing), and potentially an inactivity fee if you don't draw within 12 months. Some lenders also charge a prepayment fee if you close the line early. Always calculate the total cost of fees alongside the interest rate to compare products accurately.

What happens when a business line of credit expires?

When a business line of credit expires or reaches the end of its draw period, the lender conducts an annual review. They can renew the line at existing or revised terms, reduce the credit limit based on updated financials, or decline to renew and require full repayment of any outstanding balance. Proactive renewal conversations - started 90 days before expiration - give you the most leverage.

Are draw fees negotiable on a business line of credit?

Yes, many fees on a business line of credit are negotiable, particularly for borrowers with strong financial profiles or existing banking relationships. Draw fees, annual fees, and unused line fees are the most commonly waived or reduced items. Origination fees on large institutional facilities are also frequently negotiated. The rate itself is typically harder to move than the fee structure.

What is an unused line fee and how much does it cost?

An unused line fee (also called a commitment fee) is charged on the undrawn portion of your credit line, typically at 0.10% to 0.50% annually. On a $500,000 line with $400,000 unused, that's $400 to $2,000 per year in fees simply for having access to capital you haven't drawn. Not all lenders charge this; it's more common on institutional and bank revolving facilities than online lender products.

Draw Periods, Repayment Terms, and Hidden Fees on a Business Line of Credit

The interest rate on a business line of credit is the number lenders advertise. The true cost of the facility is something else entirely. Annual fees, draw fees, maintenance charges, inactivity penalties, and renewal terms can add thousands of dollars per year to what looks like a competitive facility. Most operators don't discover the full fee picture until after they've signed.

This briefing covers every fee type, what's typical, what's excessive, and which items you can actually negotiate away.

Business credit agreement documents with fee schedule highlighted on executive desk

What a Draw Period Is and How Long They Last

The draw period is the window during which you can access funds from your line. It's the active phase of the facility. Draw periods typically run from 6 months to 5 years, with the most common structures at 12 months (online lenders and community banks) and 24 to 36 months (regional and national banks).

During the draw period, you can borrow any amount up to your credit limit, repay it, and borrow again. This is the revolving feature that distinguishes a line of credit from a term loan. If you draw $200,000 on a $500,000 line and repay $150,000, you have $450,000 available again.