Business financing simplified
Revolving Credit Facility
in a nutshell
Revolving credit facilities (RCFs) is a flexible funding solution that works like a business overdraft. Your business will be set up with a pre-agreed funding limit with a lender over a set duration. During this time, you can draw down the funds you need within this limit. As you pay back what you have borrowed, this allows you to draw the funds again. This process can be repeated throughout the agreed loan duration.
The clue to what an RCF does is in the name – it is a credit facility that allows you to borrow money – and revolving means that you can draw and repay flexibly, unlike a loan.
For example, Company A is set up with a Revolving Credit Facility over 24 months with a limit of £100,000. The business draws down £50,000 for working capital. After they pay back the £50,000 + interest, they can then access £100,000 again. Note that even though they had a limit of £100,000, they will only pay interest on the amount they chose to drawdown; £50,000, which is how it is different from more typical business loan products.
The security required depends on the lender. Some RCFs can be secured against the debtor book. Some simply require a personal guarantee with no charge over the business.