Loan Agreement vs Facility Agreement: what's the difference?
When you borrow from us, the contract you sign depends on the kind of credit you are taking. A one-time loan of a fixed sum is governed by a Business Loan Agreement. Running credit — a line you can draw on, repay and draw again — is governed by a Revolving Credit Facility Agreement. They look similar at a glance but commit you to different things. This article explains the distinction so you know what you are signing.
The Business Loan Agreement: a fixed one-time loan
A Business Loan Agreement covers a single, fixed advance. You agree an amount and a term, the money is paid out once, and you repay it in set instalments until it clears. There is a defined beginning and a defined end. This is the contract behind our live product, the short-term Business Bridging Loan of £50 to £500 over 14 to 84 days, repaid weekly or fortnightly. What you are committing to is precise: a known sum, a known schedule and a known finish date. Once it is repaid, the agreement has done its job and there is nothing left running.
The Revolving Credit Facility Agreement: running credit
A Revolving Credit Facility Agreement is built for a different shape of borrowing. Rather than a single advance, it sets up a limit you can draw against, repay, and draw against again, as your needs rise and fall over time. The agreement governs the whole facility — the limit, how drawdowns work, how interest applies to what you have actually drawn, and your ongoing obligations — rather than one fixed loan. A running-credit facility is a second product we are introducing; we are describing the concept here, not claiming it is available to everyone today. For what we currently offer, the position is set out on our business loans page. The broader difference between borrowing once and having a line to dip into is covered in running credit vs a one-time loan.
What each one commits you to
The practical difference is the nature of the commitment. Under a Business Loan Agreement you commit to repaying one defined sum on a fixed timetable — simple, finite and easy to budget for, but inflexible if your needs change. Under a Revolving Credit Facility Agreement you commit to the rules of an ongoing arrangement: you are not obliged to draw the full limit, and you typically pay for what you draw, but the facility and its terms persist until ended, and the discipline of managing a revolving balance is on you. One is a single transaction; the other is a relationship with a limit.
What both have in common
Whichever agreement applies, the essentials are the same. We lend to the company, not to the director personally, and we take no personal guarantee. Before you sign, you receive a Key Information Sheet (KIS) — the plain-English pre-contract summary — setting out the cost in clear terms: the amount or limit, the term, the total amount payable, the total cost of credit, a simple annualised rate and the repayment details. We do not quote a consumer APR. Knowing how to read that summary is the best protection you have; we walk through it in how to read a Key Information Sheet. And in both cases the borrowing sits outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001, so it is not covered by the Financial Ombudsman Service or the FSCS.
The short version
Use a Business Loan Agreement when you need a fixed sum once, with a clear end date. A Revolving Credit Facility Agreement is for an ongoing line you draw on as needed. Read whichever applies alongside your KIS before you sign, so you know exactly what you are committing to.