How much does a revolving credit facility cost?

A revolving credit facility has three cost components. The headline interest rate is only one of them, and quoting it alone will mislead you.

Interest, roughly 7% to 25% a year. Charged on the drawn balance only, usually calculated daily. Secured facilities and established businesses sit at the lower end. Unsecured facilities for younger companies sit at the higher end.

Arrangement fee, 1% to 5% of the limit. A one-off charge at setup. Note that this is a percentage of the whole limit, not of what you draw. On a £200,000 facility at 2%, that is £4,000 payable whether you draw the full limit or not.

Non-utilisation fee, 0.5% to 1.5% a year. Charged by some lenders on the portion of the limit you have not drawn. Not universal, so ask.

Facilities are often reviewed annually, and a renewal fee may apply at that point. Secured facilities also carry valuation and legal costs.

Why the drawn-balance point matters

The economics of an RCF depend entirely on how much of the limit you use and for how long.

Draw £50,000 for two months on a £200,000 facility and the interest is small. The arrangement fee, calculated on the full £200,000, is likely the largest single cost of the year. Draw most of the limit for most of the year and the interest dominates instead.

That is why an RCF is expensive as long-term funding and sensible as short-term funding. If you expect to sit near the limit permanently, a term loan is usually cheaper.

What moves your rate

Facility size, whether you offer security, length of trading history, turnover, sector, and how consistently the business trades. Lenders also look at how you intend to use it, because a facility drawn predictably is lower risk than one drawn erratically.

Compare the total, not the rate

The only sound comparison is the all-in annual cost at your expected utilisation, not the advertised rate. Two facilities with the same interest rate can differ by thousands once fees are in.

We set out the interest, the arrangement fee and any non-utilisation fee side by side so you can see the real number. Comparing costs you nothing, and we are paid by the lender on completion.