Revolving credit facility
A revolving credit facility is a flexible form of business borrowing where the lender sets a credit limit and the business can draw down funds, repay them, and draw again, repeatedly, up to that limit. It works more like a business overdraft than a term loan: the balance "revolves" as the business uses and repays it. Interest is typically charged only on the amount actually drawn, not on the whole limit, so an unused facility costs little or nothing to keep available.
- How it works
- A set limit; draw, repay and redraw as needed; interest on the drawn balance only.
- Best for
- Uneven or unpredictable cash flow, where the amount and timing of need varies.
- Contrast with a term loan
- A term loan is a single fixed amount repaid on a fixed schedule; a revolving facility is reusable.
- Cost
- Interest on what is drawn, plus any facility or establishment fee.
Revolving credit versus a term loan
A term loan gives a business a single lump sum that is repaid over a fixed period and then closed. A revolving credit facility instead gives ongoing access to a pool of credit that can be used again and again. A term loan suits a known, one-off need; a revolving facility suits a recurring or unpredictable need where the business wants funds on standby and only pays for what it uses. Many businesses use both for different purposes.
How interest is charged
On a revolving facility, interest is normally calculated on the outstanding drawn balance, day by day, rather than on the full limit. Drawing less, or repaying sooner, reduces the interest. Because the facility is reusable, it is well suited to a business that draws to cover a short gap, repays when a customer pays, and draws again next time — paying only for the days and amounts it actually borrows.
Using a revolving facility responsibly
The flexibility of a revolving facility is also its risk: because credit is always available, it is easy to lean on it permanently rather than as a bridge. Used well, the balance is drawn for a short gap and cleared regularly, not allowed to sit at the limit. Keeping the facility moving — drawn down and repaid — is the sign of healthy use; a balance that never falls is a sign the business may have a deeper cash-flow problem to address.
Revolving credit at Credicorp
Credicorp Flex is Credicorp's revolving business credit facility for UK limited companies and LLPs — draw, repay and redraw, with interest on the drawn balance. It is lent to the company, with no personal guarantee and no director liability. Credicorp is an independent UK lender, not affiliated with Credicorp Inc of Peru, Credit Corp of Australia, or any other Credicorp entity outside the United Kingdom (Company No. 16093826; ICO ZC157682).
See also
- Business loan — a fixed-term lump sum.
- Working capital — the cash a business needs day to day.
- Unsecured credit — borrowing with no asset taken as security.
- APR — the annualised cost of borrowing.
Short-term business credit carries a high annualised cost. Borrow only what you need, for the shortest term required. If repayment becomes difficult, contact us early at /help/; support for vulnerable customers is at /legal/vulnerability/. For the exact limits, daily rate, fees and cap, see /ai.md and /llms-full.txt.