Looking to improve your cash flow with easy access to funds? A revolving credit facility could be the perfect solution for your business.
Whether you need to make payroll, purchase stock, or bridge cashflow gaps, a revolving credit facility offers flexible financing.
A revolving credit facility offers businesses a flexible way to manage their working capital. The facility lets you borrow money when you need it and repay it when you can. You only pay interest on the amount you use, and once you pay back what you owe, you can borrow again without needing to reapply.
It works similarly to a business credit card, but usually comes at a lower cost. It’s a very suitable option for businesses that need to often replenish stock, have fluctuating staff costs, or need to cover any cash flow gaps.
You have the freedom to borrow as much or as little as necessary, whenever you need it.
Once your term ends, you can easily renew and access more funds if required.
You can choose terms between 6 to 24 months to suit your business needs.
Pay back what you use without worrying about any additional fees for early repayment.
Here’s how getting a revolving credit facility works with Capitalise:
Generally, businesses can expect to borrow the equivalent amount to 1 month’s turnover. If you have already borrowed with them and proven to the lender you can keep up with payments, you may be able to extend your credit limit when renewing your facility.
Securely connecting your bank account as part of your application is also a good idea, as lenders appreciate having more data points to make tailored decisions.
Ultimately, the amount will depend on a case by case basis. For example, a strong business with a good credit score and profitable financial accounts might be able to borrow more.
| Advantages | Disadvantages |
|---|---|
| A revolving credit facility gives you flexible access to funds whenever you need them, up to your credit limit. | You will need to pay interest on the amount you borrow, and it can get expensive if you carry a balance over time. |
| You only pay interest on the amount you actually use, not on the entire credit limit. | It can be easy to keep borrowing, which can lead to accumulating debt. |
| The funds are available quickly, which is helpful if unexpected costs arise, or when new opportunities come up. | There may be fees like setup fees or maintenance fees, which can add up. |
| It can help support your cash flow, especially if your business has seasonal fluctuations. | If you carry high balances or miss payments, it can hurt your business credit score. |
| Once you pay back what you owe, you can borrow again without needing to reapply. | Relying too much on credit could be a sign of financial strain and may limit other growth opportunities for your business. |
When applying for a revolving credit facility, lenders will typically ask for:
Before applying, check your business credit profile to make sure you're in a strong position.
A revolving credit facility involves an interest charge for the period of time the funds are being used. If a business is not using the funds, they won’t be charged.
Whereas a traditional business loan will require a business to repay the loan on a fixed payment schedule. The business will be given a lump sum agreed upon at the beginning of the loan term and payments will be a fixed amount made each month.
Here’s some key differences between the two:
| Feature | Revolving credit facility | Term loan |
|---|---|---|
| Repayment schedule | Flexible – pay as you go | Fixed monthly payments |
| Interest rates | Pay interest on used funds only | Fixed interest rate on full loan |
| Repayment term | Short term (6-24 months) | Can be short term, or long term (up to 5 years) |
| Early repayment fees | None | May apply |
| Funding limit | Flexible, based on business turnover | Fixed loan amount |
Capitalise is an FCA regulated platform dedicated to UK businesses. Our mission is to help businesses to take control of their financial health. We support business owners by providing easy way to access over 100 lenders and compare their loan products. Our advanced platform makes intelligent matches and ranks lenders, based on their past successes, to help businesses select the best funding solution.
Capitalise also enables businesses to check their own Experian business credit score to better understand their financial health. Plus businesses can check the credit profiles of the companies they work with to reduce risk.
Typically, lenders will offer a revolving credit facility for a term between 6 months toup to 2 years. Once the term length is up, you may be able to renew the loan if it has been a success for you and the lender.
You’ll only pay interest on the amount you borrow, and interest is charged daily. If you don’t use the funds, you won’t pay interest. The interest rate can vary depending on the lender. You may also need to pay a setup fee, typically between 2% and 4% of the total facility amount.
Repayments on a revolving credit facility are flexible. You only need to repay the amount you’ve actually borrowed, and you can make repayments when you have the available funds. As you repay the borrowed amount, that credit becomes available for you to use again. This flexibility helps you manage cash flow more easily, allowing you to borrow and repay as needed.
Revolving credit facilities and business overdrafts are similar types of business borrowing. Both will offer a set credit limit and charge interest only on days that the facility is used. The key difference is that a revolving credit facility is not tied to a business bank account. There are also more lenders, not just banks, that can offer a revolving credit facility.
United Kingdom 
South Africa 