How the interest actually works
Draw $20,000 against a $75,000 limit and interest accrues on $20,000. The remaining $55,000 costs no interest.
It is normally charged on the daily balance, so ten days of use costs ten days of interest. Repaying quickly genuinely costs less, unlike a fixed factor rate.
This is why a line beats a lump sum for a gap that opens and closes: the lump sum charges you for the whole amount for the whole term whether the money is working or sitting there.
The fees that are not interest
Maintenance or annual fees, charged simply for having the facility.
Draw fees, a flat charge or small percentage per draw, which make frequent small draws disproportionately expensive.
Non-utilisation fees on the undrawn balance — less common in small-business lines than in commercial banking, but they exist.
Minimum draw amounts and minimum interest periods, which can mean a three-day need costs a month.
How to compare two offers
Model a realistic year: how often you would draw, how much, and for how long. Then total interest plus every fee under each offer.
A lower rate with a draw fee frequently loses to a higher rate without one, for a business that draws often.
Ask for the fee schedule in writing. 'No cost unless you use it' is a summary, and the schedule is the fact.