Benefits of revolving credit facilities
Key benefits of revolving credit solutions include:
- Flexibility to borrow as much or as little as you need, up to a predetermined credit limit
- Ongoing access to funds
- Assurance of cash availability to take advantage of opportunities
- A facility can act as a cashflow contingency to protect against unexpected costs or challenges
By using a revolving credit facility rather than a loan, you can borrow more flexibly when you need to and pay back when funds aren’t required.
Businesses may look to use a revolving cash flow facility when undertaking large investment so they have a pool of contingency funds available should they be required, else they might be left in a difficult position.
What is a revolving credit facility?
A revolving credit facility is a type of loan that provides businesses with ongoing access to funds. The facility has a predetermined credit limit, which you can draw from as needed. Unlike a traditional loan, a revolving credit facility does not have a set repayment schedule. Instead, you can repay and redraw funds as often as needed, up to the credit limit. Typically, a revolving credit facility is used to finance working capital, stock, or other short-term business expenses.
How does a revolving credit facility work?
A typical revolving credit facility journey is as follows:
Initial review: You would provide us with a copy of your financials and business bank statements for review.
Credit assessment: The lender evaluates our proposal and your creditworthiness and determines a maximum credit limit.
- Drawdown: Once the credit limit is established, you can draw down funds as needed, up to the credit limit. You can draw down funds all at once or in multiple tranches.
- Repayment: You make monthly interest payments on the amount borrowed. You can repay and redraw funds as often as needed, up to the credit limit. The repayment schedule is flexible, often with no set schedule for the repayment of the principal.
- Renewal: Revolving credit facilities are often set for a period up to 12 months and subsequently renewed. As long as you have used and repaid the facility without issue, lenders would often be happy to renew and can adjust the credit limit based on your financial performance and creditworthiness to support your business’ growth.
