Revolving Credit Facility Loan

Revolving credit facilities, like overdrafts, are not fixed-term business loans. Your business and the lender will have agreed on a funding cap, and you can withdraw funds, repay it, and withdraw again – exactly like an overdraft.

No early repayment or commitment fees – Another fantastic feature of UK revolving credit facilities is that there are no early payback fees, allowing you to pay off your debt as quickly as you wish. You don’t have to sign a new agreement every time you need to use your credit facility.

Pay interest only when you use it – The interest rate on credit facility loans is fixed, and you only pay interest when you utilise the facility. There is no need to pay interest if you are not utilising it. It’s a financing choice that you can readily manage.

What is a revolving credit facility loan?

A revolving credit facility works similarly to an overdraft in that your company can take funds as needed to pay a variety of business expenses.

Borrowers can use revolving credit to borrow and return money. Because banks are unwilling to give firms overdrafts, revolving credit is a popular option.

Revolving credit is a funding solution that is ideal for businesses that are experiencing cash flow issues, whether due to seasonality or unpredictable financial needs. Interest is usually only paid on the money you withdraw from your revolving credit account.

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How can I use it?

Just like an overdraft, businesses might benefit from a cash flow boost since revolving credit can be obtained whenever they need it. Paying invoices on time, replenishing stock levels promptly, paying workers on time, and sleeping without financial stress are all key advantages of a revolving credit agreement.

How much can you borrow?

How much can you borrow?

Your business credit history and the strength of your financial statements will determine how much you can borrow. However, the amount you can access is normally one month's worth of earnings.
You can use the funds to pay a single hefty fee or a series of smaller instalments; the choice is yours. You can use it whenever you see fit with your business, whether it's to bridge a monetary gap or to never use it again.
These types of facilities allow you to keep withdrawing and repaying as often as you like. Business banks can take a long time to come back to you, with a RCF you'll get quick decisions, flexible funding options and a short term cash injection.
Once you drawdown, the money will be deposited into your chosen bank account, this financing option is different to traditional loan as you're offered a line of credit with a maximum amount which can be utilised as often as needed.
It works much like your typical business overdrafts and it can be an unsecured business loan or a secured business loan. Bridging loans can often be interest only payments for a period as a revolving loan, giving clients complete flexibility with their loan facility.
If you're deciding between a revolving credit facility and a business loan, one distinction between the two is that revolving credit has a fixed interest rate and you just pay as you use it.
When using revolving credit, interest is normally levied daily, and the rate is determined by how much you spend on any particular day.

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What are the advantages?

RCF financing is a versatile type of loan. You're not locked into a long-term commitment - withdraw money as needed and repay cash over time, repeating the cycle until the funds are no longer needed.
If you're a good client who uses and repays revolving credit on time, there's a good possibility your credit limit will be increased. This implies a revolving credit facility can expand along with your company.
If you need money right away, certain lenders will let you take money the same day you apply. This is a lot faster option for financing than a business loan, which might take weeks to complete. Furthermore, if you require additional funds, RCF finance offers you with a financial cushion that you may use whenever you require it.
Pay interest only when you use it - The interest rate on credit facility loans is fixed, and you only pay interest when you utilise the facility. There is no need to pay interest if you are not utilising it. It's a financing choice that you can readily manage.
You don't have to sign a new agreement every time you need to use your credit facility.
Businesses might benefit from a cash flow boost since revolving credit can be obtained whenever they need it. Paying invoices on time, replenishing stock levels promptly, paying workers on time, and sleeping without financial stress are all key advantages of a revolving credit agreement.

How does it work?

Do you qualify for a revolving credit facility?

Lenders will examine your financial performance, including your credit history and asset value, when determining your appropriateness for a revolving credit arrangement.
Company directors signing a personal guarantee, you can reduce the risk for lenders. A personal guarantee tells the lender that you believe in your company completely. Lenders typically require you to be a homeowner to qualify for a RCF.
There are many options available when it comes to obtaining a revolving credit arrangement. Each RCF lender will have their unique set of terms and interest rates, and not all of them will be suitable for your company.

More about Revolving Credit Facilities

Revolving credit may be the business finance option you’ve been seeking if you need credit lines quickly – but don’t want to go through the loan application process.

A revolving credit facility (RFC) is a loan that can be used whenever money is needed. Revolving credit could be the financial solution for you if you’re a UK business owner looking for alternate financing solutions.

The loan facility and amount of credit you are offered is dependant on several factors; credit score, financial modelling, current commitments and time trading.

If you’re looking for a flexible credit facility opposed to term loans, this could be the type of credit you’ve been searching for.

Lenders that offer these fund types, don’t usually entertain applications with bad credit. However, if you’ve settled any monies outstanding and you can evidence this, they may be able to help.

You can take money out of a revolving credit account whenever you need it. Learn more about a revolving credit facility (RCF), including how it works, the advantages and disadvantages, and whether your company qualifies. Whereas we’d normally recommend using a business loan calculator, loan calculators are typically used for term loans with fixed monthly repayments.

If you’ve already explored business credit cards, invoice finance, asset finance, merchant cash advance, invoice factoring or a traditional loan such as an unsecured business loan, then a RCF could be the line of credit you’ve been looking for.

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More Frequently Asked Questions

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A Revolving Credit Facility is a flexible lending method where a bank or financial institution provides a set amount of funds that a business can use, pay back, and then use again. The nature of this loan is similar to an overdraft or a credit card.

Once approved, businesses can draw any amount from the approved limit at any time. Repayments are then made within a specified schedule, typically monthly. As the business repays, the withdrawn funds become available to borrow again.

The prime benefits are flexibility and accessibility. Businesses can manage cash flow, cover unexpected costs or fund growth opportunities as needed. They only pay interest on the borrowed amount, not on the entire approved facility limit.

Eligibility requirements vary among lenders. Common criteria include a sound financial history, good credit rating, and a strong track record of business performance.

The borrowing limit depends on the lender’s assessment of your business, including financial strength and creditworthiness. It can range from a few thousand pounds to several million.

Once you have submitted all necessary documentation, it typically takes between 3-5 days for setup. Subsequent drawdowns from the facility are generally immediate.

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Interest rates vary based on the lender, your credit rating, and the loan amount. The rate is usually a variable rate, and you only pay interest on the funds you withdraw.

Yes, lenders often charge an arrangement fee for setting up the facility and an unused facility fee when you don’t draw down the entire approved limit for a given period.

This depends on the lender. Some may require collateral (secured line of credit), while others might not (unsecured line of credit) but could charge higher interest rates to offset the risk.

You’re required to make at least the minimum monthly payment. The minimum usually covers the interest costs and a small part of the principal. Repaying more than the minimum reloads your available credit faster.

Yes, in most cases, you can repay the entire loan early. Note the potential for early repayment fees, which would be outlined in your agreement.

Yes, a Revolving Credit Facility can often be renewed upon expiration. Renewal terms are subject to negotiation with the lenders and may depend on the borrower’s creditworthiness and business performance.

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