What is a revolving credit facility?

A revolving credit facility is a pre-agreed credit limit you can dip into whenever you need it. Draw funds, repay them, and the limit replenishes so you can draw again. No reapplying each time.

The part that matters most: you pay interest only on the balance you have actually drawn, not on the limit sitting there unused.

Say you agree a £100,000 facility. You draw £40,000 to buy stock, repay it over two months, then draw £60,000 to cover a VAT bill. Interest is charged on the drawn balance only, day by day. The rest of the limit costs you nothing to have available, although some lenders charge a small fee on the undrawn portion.

You will see the same product called an RCF, a revolving credit line, a revolving line of credit, revolving finance, or just a credit line. The names vary by lender. The structure does not.

What it suits

It fits businesses with recurring or unpredictable short-term cash needs: seasonal swings, stock purchases ahead of a busy period, quarterly VAT, gaps between paying suppliers and being paid by customers.

It is a poor fit for long-term funding. The rates are higher than a secured term loan, so borrowing over several years gets expensive. If you have one fixed thing to buy, a business loan is usually cheaper.

What you need to qualify

Lenders typically want a limited company, LLP or PLC with at least 12 months of trading history and turnover above £100,000. Most will ask directors for a personal guarantee, particularly on unsecured facilities.

We do not arrange revolving credit facilities for sole traders or ordinary partnerships. A business overdraft is the usual route there.

If you are weighing an RCF against an overdraft or a term loan, we will tell you plainly which one fits your cash flow pattern before you apply anywhere.