{"id":28704,"date":"2023-10-25T13:29:46","date_gmt":"2023-10-25T13:29:46","guid":{"rendered":"https:\/\/swoopfunding.com\/ca\/?post_type=business-glossary&p=28704"},"modified":"2025-04-24T13:52:57","modified_gmt":"2025-04-24T13:52:57","slug":"revolving-credit","status":"publish","type":"business-glossary","link":"https:\/\/swoopfunding.com\/ca\/business-glossary\/revolving-credit\/","title":{"rendered":"Revolving credit"},"content":{"rendered":"

Definition<\/h3>\n

Revolving credit refers to a type of credit arrangement that allows individuals or businesses to borrow money up to a predetermined limit, repay it, and then borrow again. <\/span><\/p>\n

What is revolving credit?<\/h3>\n

Unlike a traditional loan, revolving credit provides a continuous line of credit that can be used and repaid repeatedly, as long as it stays within the established credit limit.<\/span><\/p>\n

The credit limit is the maximum amount a borrower can access through the revolving credit arrangement. It is determined by the lender based on the borrower’s creditworthiness, financial situation, and other factors.<\/span><\/p>\n

Borrowers are charged interest only on the outstanding balance that they carry from one billing cycle to the next. The interest rate<\/a> can be variable or fixed, depending on the terms of the credit agreement.<\/span><\/p>\n

Unlike traditional loans with a fixed repayment schedule, revolving credit does not have a set timeline for repayment. Borrowers have the flexibility to repay the outstanding balance at their own pace.<\/span><\/p>\n

Revolving credit provides a high level of flexibility and convenience, as it allows borrowers to have access to funds when needed without the need to reapply for a new loan.<\/span><\/p>\n

Example of revolving credit<\/h3>\n

Let’s consider a manufacturing company, XYZ Corp, that has a revolving credit facility with a bank for $1,000,000. This credit line allows XYZ Corp to borrow funds up to the specified limit whenever they need additional working capital.<\/p>\n

    \n
  1. In January, XYZ Corp faces a cash flow shortage due to delayed payments from customers. They borrow $500,000 from their revolving credit line to cover operating expenses and payroll.<\/li>\n
  2. By February, XYZ Corp receives payments from its customers, improving their cash flow position. They repay $400,000 of the $500,000 borrowed, reducing their outstanding balance to $100,000.<\/li>\n
  3. In March, XYZ Corp secures a large contract that requires upfront investment in raw materials and production equipment. They draw an additional $600,000 from their revolving credit line to finance these expenses.<\/li>\n
  4. By April, XYZ Corp completes the project and starts receiving revenue from the new contract. They use the incoming cash flow to repay $500,000 of the $600,000 borrowed in March<\/li>\n<\/ol>\n

    This example illustrates how revolving credit can help businesses manage cash flow fluctuations and fund short-term financing needs as they arise, providing flexibility and liquidity to support operations and growth.<\/p>\n","protected":false},"author":1,"template":"","class_list":["post-28704","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 Revolving credit refers to a type of credit arrangement that allows individuals or businesses to borrow money up to a predetermined limit, repay it, and then borrow again. What is revolving credit? Unlike a traditional loan, revolving credit provides a continuous line of credit that can be used and repaid repeatedly, as long as it stays within the established credit limit. The credit limit is the maximum amount a borrower can access through the revolving credit arrangement. It is determined by the lender based on the borrower’s creditworthiness, financial situation, and other factors. Borrowers are charged interest only on…<\/p>\n","category_list_v2":"","author_info_v2":{"name":"root","url":"https:\/\/swoopfunding.com\/ca\/author\/root\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28704","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary"}],"about":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/types\/business-glossary"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"version-history":[{"count":1,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28704\/revisions"}],"predecessor-version":[{"id":38976,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28704\/revisions\/38976"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/media?parent=28704"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}