Revolving Credit Facility
Access to credit when you need it
A credit line to allow your business to grow
Revolving credit facilities give you the fire power to take on new clients, buy property or pay suppliers quicker.
What is a revolving credit facility?
With bank overdrafts being more and more difficult to come by, revolving credit facilities are a great alternative, giving businesses and property investors a fixed credit limit to dip in and out of whenever you need.
While a great concept, business overdrafts are not so common anymore as banks have tightened up on them. However, a revolving credit facility carries out materially the same purpose, which is why it is sometimes referred to as an overdraft-alternative. It gives you a safety net, knowing that credit is right there to draw upon whenever your business needs it.
A revolving credit facility can be secured by property, or unsecured if used for business-purposes.
Revolving Credit Facility for Property
A property revolving credit facility is a flexible financing option that provides property investors with access to a predetermined amount of capital, which can be drawn down, repaid, and redrawn as needed. It is secured against one or more properties – whether they are residential or commercial – and gives you access to funding during the term of the facility. This type of facility is particularly useful for property investors who require funds for various purposes, such as property acquisitions, renovations, or other investment-related expenses.
Some will refer to a property credit line as a property credit line, or a “hunting licence”, as it gives you the fire power to go “hunting” at auction knowing you have cash available to win yourself a deal. This type of facility is very similar to a bridging loan in terms of what it achieves, however it can be much more flexible.
Revolving Credit Facility for Business
A revolving credit facility is an ongoing agreement between a business and a finance company that a credit line up to a certain amount is available whenever needed. In this respect, it can be compared with a credit card agreement. The card is there in your wallet, and if you never use it, there is nothing to pay. If you do take advantage of the credit facility on offer, then there are minimum monthly repayments and interest charges to consider.
If you take advantage of the full credit amount, then as soon as you have repaid a set amount, you can borrow more. This is why the word “revolving” is used. It is a credit line that you can keep using time and again.
Business facilities are typically unsecured, meaning property is not required as security. Instead, lenders will request a debenture or a personal guarantee to support the borrowing.
The banner of revolving credit facility could cover a variety of different working capital solutions, including:
- Invoice finance
- Trace finance
- Some forms of flexible business loans
Benefits of a revolving credit facility
This type of funding is far more flexible than a business loan or bridging loan. It gives you all the control and choice of an overdraft, but easier and quicker to get in place. Having a revolving credit facility in place gives you the following benefits:
- Only pay interest on outstanding daily amount
- Fills cash flow gaps while waiting to receive funds
- Flexible use of funds – use funds to meet any business need
- Draw and repay what you want, when you want (within the credit limit)
Pros and cons of revolving credit facilities
Obtaining a revolving credit line in this way is typically straightforward and speedy. As it is a modern type of finance, lenders that offer this product are far quicker than banks. Your online application can go from initial application to final approval in a day or two.
This type of overdraft-alternative is designed for short-term borrowing – for working capital and day to day payments. As interest is generally charged daily you only ever pay for what you use. It’s a bit like pay-as-you-go, and so it can be a very clever way of funding your business.
If, however, you need a cash sum for a longer period then this type of borrowing is not for you. There are more cost-effective finance products designed to fund longer-term purposes.
Your Revolving Credit Facility is waiting
Talk to one of our Business Finance Specialists. We’re on hand to take you through the options available.