Operating line of credit interest calculator
A revolving operating line is the hardest loan to keep track of in your head. Money goes out in spring, some comes back after early sales, and interest builds up the whole time. Enter your draws and payments and you'll see what you owe on any date.
Draws, payments and interest
What the example shows
The line draws $195,000 between February and June, then gets two harvest payments totaling $170,000. That leaves about $35,000 of principal still out at year end, even though the payments came to 87% of what was borrowed. About $10,000 of the payments went to interest first. That's why a line can still carry a balance after you've paid back nearly everything you drew.
The average balance shows how much money the operation actually used through the season. Some lenders look at it when renewing the line, and it's an honest number for your cost per acre: average balance × rate × the share of the year it was open is roughly what the line cost you.
interest for each stretch = principal outstanding × rate × days in the stretch ÷ 365
Tracking several of these at once? The free farm bill due-date tracker keeps them in date order.
Ways to spend less on the line
- Draw late, pay early. Every day money sits in the checking account instead of out in the field still costs interest. Draw the week a bill is due, not the month before.
- Send early sale money back right away. A $50,000 payment in September instead of December saves about $1,000 at 8.25%.
- Compare against cheaper money. If a retailer offers 0% on chemicals until fall, using it instead of the line saves the line's full rate on that amount.
Questions people ask
How is interest charged on an operating line?
On the balance you actually have out, day by day. If you have $75,000 out for 73 days and then $165,000 out for the next 66 days, each stretch is charged its own simple interest. The interest builds up until a payment comes in.
Do payments go to interest or principal first?
On most farm operating notes, a payment pays off the interest built up so far, and the rest goes to principal. This calculator works that way. If your lender bills interest separately, for example monthly or quarterly, the totals come out about the same, but your statement will look different.
Why is my lender's number a little different?
Lenders differ on day-count (365 or 360), whether the payment day itself accrues interest, and how variable-rate changes are dated. Use this calculator to plan and check your statement. For an exact figure, ask the lender for a payoff quote.
My rate is variable. What should I enter?
Enter today's rate for a current estimate. To plan, run it again at a rate one point higher to see how much a rate increase would cost you over the season.
Is an operating line cheaper than input financing?
Sometimes. Retailer programs can offer 0% or below-market rates for a set period, while the operating line is often prime plus a margin. Compare the actual interest on your draw schedule with the input loan calculator, and include any fees.
Related tools
Not financial advice. These calculators give estimates from the numbers you enter. Your lender's terms, fees, day-count method and tax situation can change the result. Check with your lender or advisor before you act. Full disclaimer.