While a credit facility can be a valuable financial tool, it also comes with responsibilities. Borrowers are obligated to manage their credit responsibly, making timely payments and adhering to the terms and conditions outlined in the credit agreement.<\/span><\/p>\nExample of a credit facility<\/h3>\n
ABC Corporation, a manufacturing company, secures a credit facility from a bank to support its working capital needs. The credit facility provides ABC Corporation with access to a line of credit of up to $1 million.<\/p>\n
As part of the credit facility agreement, ABC Corporation can borrow funds from the line of credit as needed to finance its day-to-day operations.<\/p>\n
For instance, if ABC Corporation experiences a temporary cash flow shortage due to delays in receiving payments from customers, it can draw $200,000 from the credit facility to bridge the gap and maintain its operations.<\/p>\n
ABC Corporation repays the borrowed funds, along with interest, according to the terms of the credit facility agreement. The company can borrow and repay funds from the credit facility multiple times within the agreed-upon period.<\/p>\n","protected":false},"author":88,"template":"","class_list":["post-31589","business-glossary","type-business-glossary","status-publish","hentry"],"acf":[],"featured_image_urls_v2":{"full":"","thumbnail":"","medium":"","medium_large":"","large":"","1536x1536":"","2048x2048":"","image_blog":"","image_podcast":"","image_banking":"","image_blog_internal":"","image_blog_medium":"","image_single_banking":""},"post_excerpt_stackable_v2":"
Definition A credit facility is a financial arrangement between a lender and a borrower that provides the borrower with access to a predetermined amount of money or credit for a specified period. What is a credit facility? A credit facility serves as a flexible source of funding that a borrower can draw upon as needed, up to a certain limit. Types of credit facilities: Revolving credit facility: This type allows borrowers to repeatedly draw and repay funds up to a specified limit. Interest is typically charged on the outstanding balance. Term loan facility: This provides a specific amount of funds…<\/p>\n","category_list_v2":"","author_info_v2":{"name":"AI","url":"https:\/\/swoopfunding.com\/au\/author\/artificial-intelligence\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/business-glossary\/31589"}],"collection":[{"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/business-glossary"}],"about":[{"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/types\/business-glossary"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/users\/88"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/media?parent=31589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}