Revolving Credit Facility Cost UK: Rates And Fees In 2026

A revolving credit facility typically costs between 1% and 4% a month in interest on the funds you draw down, working out at roughly 12% to 50%+ representative APR depending on your risk profile, plus a one off arrangement fee of around 1% to 3% of your agreed limit. Because interest only applies to the money you actually use, not your full limit, the real cost of a revolving credit facility comes down to how much you draw and how long you carry a balance, far more than the headline rate on its own.

Most facilities on the Capitalise panel don't charge a fee for early repayment, and many don't charge anything on the portion of your limit you leave untouched either, though a smaller number of lenders do. This guide breaks down exactly what a revolving credit facility costs, how interest is calculated, real worked examples with every fee included, and how it compares to a business overdraft, credit card and term loan, so you can see the true cost before you apply.

Revolving credit facility costs at a glance

Cost	Typical range	Notes
Interest rate	1% to 4% a month on funds drawn	From 12%+ representative APR depending on your risk profile
Arrangement fee	1% to 3% of the agreed limit	Charged once, usually when the facility is set up
Unused limit fee	0% to around 1% a year on the undrawn portion	Charged by a minority of lenders, not standard practice
Renewal fee	Sometimes charged when the facility is renewed	Varies by lender, worth confirming before your term ends
Early repayment fee	None on most facilities across our panel	Clearing what you owe early is usually free
Late or missed payment fee	Varies by lender	Can also affect your business credit score

How is interest calculated on a revolving credit facility?

Interest is calculated daily on your outstanding drawn balance, not on your full credit limit, so the amount you owe only grows while you're actually using the funds. If you draw down £20,000 from a facility at a rate of 2% a month and repay it within 30 days, you'd pay roughly £400 in interest, whether your total limit is £20,000 or £100,000.

This is the single biggest thing that separates a revolving credit facility from a term loan. A term loan charges interest on the entire amount from day one, whether you need all of it immediately or not. A revolving credit facility only costs you money for the days a balance is actually outstanding, which is why clearing what you've drawn as soon as you can is the single most effective way to keep the cost down.

What fees come on top of the interest rate?

The interest rate is rarely the whole story. Depending on the lender, you may also come across:

Arrangement or facility fee. A one off charge, typically 1% to 3% of your agreed limit, usually deducted from the funds released or added to your first repayment.
Unused limit fee. A small number of lenders charge a fee on the portion of your limit you don't draw down, usually up to around 1% a year, though most facilities on the Capitalise panel don't charge this at all.
Renewal fee. Some lenders charge a fee when your facility comes up for renewal at the end of its term, which is worth checking before you sign up.
Late or missed payment fee. Charged if you miss a scheduled repayment, and can also affect your business credit score.
Security or legal fees. If the facility is secured against business assets, you may face additional legal or valuation costs to put that security in place.

Always ask for the full cost breakdown before comparing lenders on rate alone, since a lower headline rate with extra fees attached can end up costing more than a slightly higher rate with none.

Real cost examples: what you would actually pay

These examples show how the rate, fees and how much of your limit you draw combine into a total cost, using typical scenarios at different limits and terms.

Example 1: a retailer topping up stock

Limit: £40,000 | Amount drawn: £15,000 | Rate: 2% a month | Arrangement fee: 2% | Term drawn: 3 months

Arrangement fee: £800
Interest over 3 months: £15,000 x 2% x 3 = £900
Total cost: £1,700

Example 2: an agency covering payroll twice over

Limit: £75,000 | Rate: 2.5% a month | Arrangement fee: 2.5%

First draw of £30,000 repaid after 2 months, then a second draw of £20,000 for a further 2 months once that portion of the limit frees up again.

Arrangement fee: £1,875
Interest on first draw: £30,000 x 2.5% x 2 = £1,500
Interest on second draw: £20,000 x 2.5% x 2 = £1,000
Total cost: £4,375

Example 3: a wholesaler carrying a balance for a full year

Limit: £100,000 | Average balance drawn: £50,000 | Rate: 3.5% a month (reflecting a weaker credit profile) | Arrangement fee: 3%

Arrangement fee: £3,000
Interest over 12 months: £50,000 x 3.5% x 12 = £21,000
Total cost: £24,000, roughly 48% of the average balance drawn over the year

This last example shows why carrying a balance continuously for a long period gets expensive quickly, and why a revolving credit facility works out cheapest when you draw, repay and clear the balance rather than letting it run for months at a time.

What affects how much you pay?

Your rate and fees aren't fixed across the market, they depend on a mix of factors that lenders assess when they price your facility:

Your business credit score. A stronger business credit score usually unlocks a lower rate and a higher limit.
Turnover and trading history. Lenders generally offer better pricing to businesses with consistent turnover and a longer trading track record.
Security offered. A secured facility, backed by business assets, often comes with a lower rate than an unsecured one, though it adds risk if repayments are missed.
How much of your limit you draw. Since interest only applies to funds drawn, using a smaller share of your limit keeps your cost down regardless of the rate.
How long you carry a balance. Interest accrues daily, so clearing what you owe quickly costs far less than letting a balance run for months.
The lender you choose. Pricing for the same business profile can vary meaningfully between lenders, which is why comparing more than one matters.

Revolving credit facility cost vs other finance options

Finance type	Typical cost	Interest charged on
Revolving credit facility	1% to 4% a month, roughly 12% to 50%+ representative APR, plus 1% to 3% arrangement fee	Funds drawn down only
Business overdraft	Bank of England base rate plus roughly 3% to 8%, plus an annual arrangement fee	Funds drawn down only
Business credit card	Roughly 15% to 35% representative APR	The balance carried past the interest free period
Business loan	Roughly 7% to 30%+ representative APR, fixed for most terms	The full loan amount from day one

A revolving credit facility usually sits between an overdraft and a business credit card on cost, cheaper than a card once you're carrying a balance, but with a higher limit and more certainty than an overdraft, which your bank can reduce or recall at short notice. If you need a fixed amount for a single known cost rather than ongoing access to funds, a business loan or business line of credit may work out cheaper overall.

How to reduce the cost of a revolving credit facility

A few practical habits keep the cost of a revolving credit facility as low as possible:

Only draw what you need. Since interest applies to what you've drawn, not your full limit, leaving the rest untouched costs you nothing on most facilities.
Clear balances as soon as you can. Interest accrues daily, so repaying early, which carries no fee on most facilities, reduces your total cost straight away.
Check your business credit score before applying. A stronger score typically unlocks a better rate and a higher limit, so it's worth reviewing your business credit profile first.
Ask for the full fee breakdown. Confirm whether an unused limit fee, renewal fee or security costs apply before you compare the headline rate against another lender.
Compare more than one lender. Rates and fees vary by lender for the same business profile, so comparing offers side by side can meaningfully reduce your total cost.

Get a revolving credit facility for your business

The true cost of a revolving credit facility depends on your rate, fees and how you use it, which is exactly why comparing real offers matters more than any single advertised rate. Apply for a revolving credit facility through Capitalise to compare offers from our panel of UK lenders, with a dedicated funding specialist on hand to walk you through the rate and fees on every offer before you accept.

How much does a revolving credit facility cost?