Revolving credit

2 min read

ReusableRepay and redraw within the limit

Pay on useInterest only on drawn funds

In plain terms

Revolving credit works more like a flexible credit limit than a fixed loan. You're approved up to a ceiling — say £100,000 — and you draw whatever you need, whenever you need it. As you repay, that headroom is restored and available to use again. It "revolves" rather than running down to zero like a term loan.

The defining feature is that you only pay interest on the amount you've actually drawn, not on the full limit. If you have a £100,000 facility but are only using £20,000, you pay interest on £20,000. That makes it well suited to unpredictable, lumpy cash needs where you can't say in advance exactly how much or when.

Why it matters to your business

Most business spending isn't smooth. Stock orders, tax bills, a sudden opportunity or a slow-paying customer all create irregular gaps. A revolving facility sits ready in the background so you can act immediately without arranging fresh finance each time.

That standing availability is the real value. It removes the delay and friction of applying for a new loan every time cash tightens, and it stops you over-borrowing — you take only what the moment requires. Credicorp Flex is a revolving facility built for exactly this: draw down in minutes, repay when customers pay you, and the limit refreshes ready for next time. It's a close cousin of a business overdraft, but typically with a clearer limit and more predictable terms. See our revolving credit facility guide for a deeper look.

A worked example

A wholesaler holds a £80,000 revolving facility. In a busy month it draws £50,000 to buy stock ahead of demand, paying interest only on that £50,000. As customers pay over the following weeks, it repays the balance, and the full £80,000 becomes available again.

The next quarter it might draw nothing at all, paying little beyond any small facility fee. The same arrangement flexes up and down with the business — useful in a peak, dormant in a quiet spell, always ready.

Revolving credit versus a term loan

The two solve different problems:

Feature	Revolving credit	Term loan
Structure	Reusable limit	Fixed lump sum
Interest	On drawn amount only	On full balance
Best for	Variable, ongoing cash needs	One-off, planned spend
Repayment	Flexible, redrawable	Fixed schedule

A term loan suits a single known purchase like equipment; revolving credit suits the ebb and flow of working capital. Many companies run both.

Frequently asked questions

Do I pay interest on the whole credit limit?

No — only on what you've actually drawn. If you have a £100,000 facility and use £25,000, you pay interest on £25,000. There may be a small fee for keeping the facility available, but the limit itself isn't charged as interest.

How is revolving credit different from an overdraft?

They're similar in spirit, but a revolving facility usually has a defined limit and clearer terms, and isn't tied to your current account. It's often more predictable than an overdraft a bank can review or withdraw.

Can I repay and borrow again?

Yes — that's the whole point. As you repay, your available headroom is restored and you can draw again up to the limit, without reapplying each time.