Revolving Credit Facility
What is a Revolving Credit Facility?
A revolving credit facility is a line of credit that allows businesses to draw down funds as and when they require, within a pre-agreed limit.
Why Choose a Revolving Credit Facility?
Revolving credit facilities are extremely flexible. You only draw down funds as required, and only pay for what you are using.
How it works:
A revolving credit facility works much the same way as a standard overdraft or credit card. You are charged interest daily based on what you are using within your agreed credit limit.
Revolving Credit at a Glance
Eligibility:
Any business that has been trading for 6+ months.
Benefits:
Similar to an overdraft. Only pay interest on drawn funds regardless of your agreed credit limit.
Loan Amounts:
Facilities available from £10,000 - £2m
Turnaround times:
Approval in as little as 48 hours.
Term:
Flexible revolving terms up to 2 years
Repayment terms:
Interest paid only on drawn funds. Interest only and retained options available.
Interest Rates:
From 0.75% per month
What is a Revolving Credit Facility?
A revolving credit facility is a line of credit that allows you to draw down funds as and when you require, within an agreed limit. Money can be drawn, repaid, and redrawn again as many times as you wish. This type of credit facility does not have a fixed repayment schedule, and interest is charged daily purely on the basis of the level of funds used.
A revolving credit facility can serve as an excellent safety net for managing your cashflow ensuring liquidity to cover your company’s day to day operations. Previously this need may have been fulfilled by a bank overdraft facility, however nowadays this is typically difficult to obtain and more expensive.
Why Choose a Revolving Credit Facility?
The biggest advantage of a revolving credit facility is the flexibility. You only draw down the funds as required – and pay only for what you are using. When you are not using the facility there is nothing to pay. Interest is charged daily and there is no long-term commitment.
Unlike other types of borrowing, you are only obliged to repay the interest each month. This keeps monthly repayments low, compared to a standard term loan whereby you will also be expected to make a capital and interest repayment. With a revolving credit facility, you choose when to pay off the principal borrowing at a time that suits you.
Another benefit is that, unlike with a term loan, you do not need to keep reapplying for credit (which can affect your credit score) each time you need to draw down funds. The pre-approved credit facility can sit in the background, giving peace of mind that funds are available should they be required.
What Type of Businesses are Suitable for a Revolving Credit Facility?
Revolving credit is especially helpful for seasonal businesses or those with volatile or unpredictable cashflow facing unexpected costs or emergencies. Funding may be used flexibly, whether for stock, work in progress, or bridging the gap between money that is due to be paid to you. Whatever the business type or need, get immediate access to funds as and when required up to your available limit.
Larger facility options are also available for property investors looking to purchase at auction.
How it Works
A revolving credit facility works much the same way as a standard overdraft or credit card. You are charged interest daily based on what you are using within your agreed credit limit. You can borrow, repay, and draw down as often as required.
The agreed credit limit is usually determined by several factors including your business turnover and your credit history, along with the assets within your business. If your cashflow and business circumstances change it is possible you may be eligible to increase your limit.
Most lenders offer terms on a revolving 12-24-month basis that can be automatically renewed. Both unsecured, and for large amounts, secured options, are available.
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