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Revolving credit facility

A credit limit your company can draw on when it needs to, repay and use again, paying interest only on what you use.

  • Free to use, no obligation
  • £5,000 to £2m+ for UK limited companies and LLPs
  • Matched to a broker who arranges revolving credit facility
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What revolving credit facility is

A revolving credit facility gives your business access to an agreed credit limit that you can draw on as and when you need it. You might take out part of the limit to cover a gap in cash flow, repay it when customers pay, then draw again later. Interest is charged on the amount you have drawn rather than the full limit, which can make it a cost-effective safety net for uneven cash flow.

It suits established companies with variable or seasonal costs, such as businesses that buy stock ahead of busy periods, wait on large customer payments or want a buffer for unexpected expenses. It works a little like a business overdraft, but is often offered by specialist lenders as a separate facility. Facilities are usually reviewed and renewed periodically, often once a year.

What businesses use it for

Covering cash flow gaps

Draw on the facility while waiting for customers to pay, then repay when the money comes in, without applying for a new loan each time.

Seasonal stock

Buy stock or materials ahead of a busy season and repay as sales come in, so you only pay interest for the weeks the money is used.

Unexpected costs

Keep a facility in place for urgent repairs, a sudden opportunity or a delayed payment, giving the business room to act quickly.

Supplier discounts

Use the facility to pay suppliers early or buy in bulk where that earns a discount, then repay over the following weeks or months.

How it works

1A limit is agreed
The lender reviews your trading history, accounts and bank statements, then agrees a credit limit. You may pay an arrangement fee when the facility is set up, and some lenders charge a fee for keeping it available.
2You draw when needed
You draw some or all of the limit whenever the business needs it, usually through an online account. Interest is charged on the amount drawn, for as long as it is outstanding.
3Repay and reuse
As you repay, that amount becomes available to draw again. Some facilities need a minimum repayment each month. The facility usually runs for a set period and is reviewed before it is renewed.

What lenders look at

Every lender has its own criteria, but these are the things they usually check.
Trading history and annual revenue
Cash flow patterns shown in bank statements
Company accounts and profitability
Credit history of the business and its directors
Existing borrowing and commitments

To use Loanleaf

  • UK limited company or LLP
  • Trading for 6 months or more
  • Annual revenue of £50,000+
  • Borrowing £5,000 or more
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Things to consider

Fees as well as interest

Alongside interest on what you draw, there may be an arrangement fee, a renewal fee or a charge on the unused part of the limit. Add these up to understand the true cost of keeping the facility in place, especially if you rarely use it.

Discipline

Because money can be drawn and redrawn, a revolving facility can drift into permanent borrowing. It works best for short-term needs that you repay regularly. If you are always at your limit, a term loan may be a better fit.

Reviews and guarantees

Lenders can review, reduce or withdraw a facility, usually at renewal, if your circumstances change. Many also ask directors for a personal guarantee. Understand the review terms and what would happen to any balance if the facility ended.

Revolving credit facility: questions and answers

How is a revolving credit facility different from a loan?
A term loan gives you a fixed sum that you repay over a set period. A revolving facility gives you a limit you can draw on, repay and use again, and you pay interest only on the amount you have drawn.
Is it the same as an overdraft?
It works in a similar way, but it is usually a separate facility rather than part of your current account, and it is often provided by a specialist lender. Limits, fees and repayment terms vary from one provider to another.
How much does it cost?
You pay interest on the amount you draw, for as long as it is outstanding. There may also be an arrangement fee, a renewal fee or a charge for keeping the limit available. A broker can explain the full costs of any facility.
How long does a facility last?
Many facilities run for around 12 months and are then reviewed and renewed, though terms vary. At review, the lender may keep, increase or reduce the limit depending on how the business is performing.
Do I have to use the whole limit?
No. You can draw as much or as little of the limit as you need, when you need it. Interest is only charged on what you have drawn, although some lenders charge a small fee for the unused part.
How can Loanleaf help?
Loanleaf is an introduction service, not a lender or broker, and we don’t give advice. You answer one short form about your company and what you need, and we match you with a specialist finance broker who works with revolving credit facilities. It’s free to use and there’s no obligation to go ahead. The broker will explain any fees of their own.
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