Revolving credit line (facility)

A revolving credit line (facility) is a rolling agreement between you (the business) and a lender – in contrast to a fixed business loan. You can use it on an as-needed basis and pay it off when it’s convenient. You have a credit limit, in the same way you do with a business credit card or bank overdraft.

Revolving credit is a type of working capital finance that enables you to borrow funds from a lender at some point in the future, up to a limit.

It’s rather like a flexible, open-ended loan. You pay monthly interest only on the amount you’ve used (drawn down) – you don’t pay anything until you actually start tapping into the line. Your payments might be irregular, because (unlike a loan) you are not being lent a lump sum of money and charged interest right away. 

Once you’ve repaid an amount of money, you can withdraw more – hence the term ‘revolving’. You can also think of revolving credit it as a type of loan that can be automatically renewed.

If you make regular, consistent payments on your revolving credit account, your lender might agree to increase your maximum credit limit – again, like a credit card or overdraft. In this sense it’s a dynamic product, compared to a non-revolving line of credit.

You would expect to pay higher fees than fixed term business loans – you’re paying for the convenience and flexibility.

Like loans, both revolving and non-revolving credit lines come in secured and unsecured versions. You can use revolving credit lines in combination with other types of finance, for example trade finance or supplier finance to help you manage supply chain funding.