Revolving Credit Facility

A revolving credit facility is considered a flexible form of capital finance due to its repayment and re-borrowing accommodations. It is typically used by businesses that require a short-term finance option that need to boost their working capital.

Revolving credit facilities can be secured by first charge over commercial or residential and second charge over residential properties. It offers multiple drawdowns on demand which can be repaid or reduced and redrawn again. After the initial set up fee, you will not have to pay any interest back until you begin using the credit facility. Interest is then charged on any balance outstanding and can be serviced or accrued.

When choosing revolving credit facility, you are removing the need for a new agreement each time you require finance and funding. By using an existing credit agreement, the revolving credit facility can be authorised in a shorter time frame, enabling you to draw down immediately and fund your business once approved. A revolving credit facility agreement typically lasts between six months and two years. This is also beneficial for businesses that need to borrow small amounts on a regular basis and prefer to pay it back over a shorter duration depending on the security.

In comparison to other lines of credit and finance, the revolving credit facility is more flexible in comparison to a fixed business loan for example. With a fixed business loan, you would be required to return the loan amount and interest over a longer term in accordance with a fixed repayment schedule. Although interest rates for revolving credit facilities are typically higher than those for fixed business loans, a revolving credit facility allows you to pay interest for the duration of the loaned amount, either for weeks or months and not the full duration of the agreement. Once the amount is fully repaid to the lender, you can return and choose to withdraw again and again.