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Revolving Credit
A flexible business line of credit you can use, repay and use again.
A revolving credit facility gives your business access to an agreed amount of credit
to help cover eligible business costs when you need it. As you make repayments,
your available credit is replenished, giving your business the flexibility
to access more funding.
What is a Revolving Credit Facility?
A revolving credit facility (RCF) is a flexible form of business finance that gives your business access to an agreed credit limit that you can draw against when you need it.
Unlike a traditional business loan where you receive a lump sum upfront, revolving credit allows you to use part of your available facility, make repayments and then reuse the amount you’ve repaid.
Sometimes referred to as a business line of credit, this type of credit facility can be particularly useful for businesses with recurring expenses, supplier payments or changing working capital requirements.
Revolving Credit Facility Example:
Imagine your business is approved for a £200,000 revolving credit facility. You need £60,000 to cover an eligible business cost, so you use £60,000 of your facility.
- Total credit facility: £200,000
- Amount used: £60,000
- Remaining available credit: £140,000
As you make repayments against the £60,000 you’ve used, the amount repaid becomes available to use again. For example, if you repay £10,000, your available credit would increase from £140,000 to £150,000, subject to the terms of your facility.
With some revolving credit facilities, interest is calculated on the amount you’ve used rather than your total available credit. However, charging structures vary between lenders and additional costs, such as arrangement or facility fees, may apply.
How Could a Revolving Credit Facility Work?
One option available through our lending panel allows eligible businesses to use their agreed facility to fund supplier invoices and other eligible business costs. Here’s an example of how this type of facility can work:
What Can a Revolving Credit Facility Be Used For?
Depending on the product, lender eligibility criteria and approval, a revolving credit facility can potentially be used for a wide range of business expenses, including:
This can make revolving credit particularly useful for businesses with regular or recurring funding requirements, rather than a single one-off purchase.
- Stock and supplies
- Supplier invoices
- Corporation Tax
- Quarterly VAT payments
- Marketing costs
- Accounting and legal fees
- Overseas suppliers
- Imported assets
- Software subscriptions and licences
- Eligible contractor invoices
Revolving Credit Facility vs Business Loan
Both a revolving credit facility and business loan can provide your business with additional funding, but they work differently.
| Revolving Credit Facility | Business Loan |
| Access an agreed credit facility | Receive an agreed lump sum |
| Draw against the facility when required | Full funding amount is provided upfront |
Depending on the lender, interest may be calculated on the amount used | Interest is calculated on the amount borrowed |
| Repaid credit becomes available again | Repayments reduce the outstanding loan |
Can be used multiple times during the access period | Further borrowing will require another application |
| Can suit recurring or changing funding requirements | Can suit defined purchases, projects or investments |
Costs and charging structures vary between lenders, so interest rates, facility fees, arrangement fees and other charges should be considered when comparing finance options. The most appropriate option will depend on what you’re looking to fund, how often you expect to require finance and your business’s individual circumstances.
Access Period vs Repayment Period
With some revolving credit products, the access period and repayment period are separate.
The access period determines how long you can draw against your available credit facility.
The repayment period determines how long you have to repay an amount you’ve used.
For example, with certain facilities available through our lending panel, an eligible cost could be funded towards the end of your access period, with the agreed repayments continuing after the access period has ended. Your exact access period, repayment schedule and applicable terms will be explained before you enter into an agreement.
Is a Revolving Credit Facility Right for Your Business?
A revolving credit facility or business line of credit could be worth considering if your business:
- Regularly pays suppliers
- Purchases stock or supplies throughout the year
- Has recurring VAT or Corporation Tax payments
- Experiences seasonal or short-term cash-flow gaps
- Needs funding at different points throughout the year
- Wants the ability to reuse repaid credit during an agreed access period
- Doesn’t necessarily need to use its entire available credit facility at once
Eligibility, available credit and terms will depend on your business’s individual circumstances and the lender’s assessment.
Revolving Credit Facility FAQs
What is revolving credit?
Revolving credit is a form of finance that allows you to borrow against an agreed credit limit, make repayments and reuse the credit you’ve repaid.
Unlike a traditional loan, where you generally receive the full amount upfront, revolving credit gives you ongoing access to available credit during an agreed access period, subject to the terms of the facility.
What is a revolving credit facility?
A revolving credit facility (RCF) is a type of revolving finance that gives a business access to an agreed credit limit.
The business can draw against its available credit when required and, as repayments are made, the repaid amount becomes available to use again during the agreed access period.
How does a revolving credit facility work?
Your business receives an agreed credit facility that you can draw against when required. As you repay the amount you’ve used, your available credit increases again and can be reused during the agreed access period.
The exact way funds are accessed depends on the product. For example, some facilities available through our lending panel can fund eligible supplier invoices directly rather than providing the full facility as cash upfront.
What is a business line of credit?
A business line of credit gives a business access to an agreed amount of funding that can be drawn against when required.
The terms “business line of credit” and “revolving credit facility” can be used to describe similar forms of flexible business finance, although the structure, fees, repayment terms and way funds are accessed can vary between products and lenders.
How much can I borrow with a revolving credit facility?
The amount your business can access will depend on factors including its financial circumstances, credit assessment and the lender’s eligibility criteria.
Your approved credit limit and the terms of the facility will be confirmed before you enter into an agreement.
Is a revolving credit facility the same as an overdraft?
Both can provide businesses with flexible access to additional funds, but they are structured slightly differently.
A business overdraft is generally linked to your business bank account, allowing the account to go overdrawn up to an agreed limit. A revolving credit facility is a separate finance facility with its own credit limit, repayment terms, fees and conditions.
How is interest calculated on a revolving credit facility?
This varies between lenders and products. With some revolving credit facilities, interest is calculated on the amount of credit you’ve used rather than the total facility available.
However, interest isn’t necessarily the only cost. Arrangement fees, facility fees and other charges may also apply, so it’s important to consider the overall cost of the facility.
What fees are charged on a revolving credit facility?
Fees vary between lenders and products. Depending on the facility, costs may include arrangement or setup fees, interest and ongoing facility fees while the credit facility remains available.
Any applicable fees, interest and repayment terms will be explained before you enter into a finance agreement.
Can revolving credit be used to pay VAT or Corporation Tax?
Depending on the facility, revolving credit may be available for quarterly VAT and Corporation Tax payments, subject to eligibility and lender approval.
Can I use a revolving credit facility more than once?
Yes. One of the main features of revolving credit is that as you repay the amount you’ve used, that credit becomes available to use again during the agreed access period.
Get a Revolving Credit Facility for Your Business
If you’re looking for a revolving credit facility in the UK, Portman can help you explore the business finance options available through our lending panel. Whether you’re looking to pay suppliers, purchase stock, manage a tax payment or cover recurring business costs, a revolving credit facility could give your business flexible access to additional funding when you need it.