A revolving credit facility (RCF) is a loan facility that enables you to withdraw money, use it, repay it, and then withdraw more money. As the name suggests, it is a ‘revolving’ loan that allows for flexible use and repayment. In a sense, you borrow from a pre-agreed pot, which ensures that you can borrow whenever you need it with very little hassle.
They have proven to be a popular loan product based on how flexible they are. It does not have a fixed number of payments, and it is therefore a simple line of credit provided to a business by a lender. The credit has a fixed maximum amount, and the business is free to use, draw from, and pay back the money whenever it needs it.
The primary benefit of an alternative financing solution like an RCF is flexibility. Businesses have a source of money they can draw from at any point to access cash on their own schedule.
It is wise to understand exactly what benefits are available to properly utilise this resource, so let’s examine them.
1.Readily Available Cash Flow
The first benefit of a revolving credit facility is the availability of money. You have access to a line of credit that is already approved, certified, and available.
Unlike conventional loans and lines of credit, which require application periods, approval, and wait times, you can access your money at any point, for any reason.
You have a cash flow that requires no special procedures to access, so you have much more availability regarding resources.
2. Easy Repayments
A considerable concern for anyone looking into a line of credit is often the steep repayment terms. Banks want their money back, and they want it now; what happens to you as a result isn’t important.
However, the open-ended, revolving nature of a revolving credit facility means this isn’t the case. You can repay the money at your own pace in a way that doesn’t put your business into financial hardship.
Of course, this is tempered by the knowledge that you only have a finite amount of resources to draw from, so until you make a repayment, you have no more credit available to you.
3. Lower Interest Rates
Interest rates on repayment plans often give businesses pause. After all, that’s how banks make their money – they loan you what you need and charge you for the privilege.
The RCF works a little differently. A typical revolving credit facility in the UK will be asset-secured. This means you can use assets to bring down interest rates—a form of security for the bank.
Ultimately, a typical RCF will have lower interest rates than your average credit card. This makes it a highly affordable resource over the long term, which businesses should capitalise on as much as possible.
4. Even Out Cash Flow
Cash flow can often be a problem for businesses. You might be a business that has seasonal sales, or fluctuating sales. In either instance, this translates to a lack of cash.
Ultimately, this is where a revolving credit facility can be useful. Because you have access to cash flow, you even out the amount of resources you have available over the course of a year. When you can borrow money from a revolving credit facility to smooth over any issues with your cash, you can still afford to make all the usual payments and not worry.
A revolving credit facility is a common resource for businesses. It has many benefits, as you can tell, which makes it a safe and relatively stress free investment option. To find out more about a revolving credit facility, get in touch with one of the team at Funding Bay, who can talk through it with you, and can match your business with the most suitable RCF lender, including Just Cashflow, iwoca or FIBR.
Alternatively, read on to find out more about RCF’s.
