Revolving credit facilities for business

What a revolving credit facility is

A revolving credit facility is an agreed borrowing limit your company can use repeatedly. Unlike a term loan, where you receive one lump sum and repay it on a fixed schedule, a revolving facility lets you draw down funds, repay them, and draw again up to the same limit — much like a business credit card, but typically with a higher limit and lower cost.

The defining feature is reusability. Repaying £20,000 of a £50,000 facility restores your available headroom to the full £50,000. That makes it well suited to recurring, unpredictable working-capital needs rather than one-off purchases. For UK limited companies managing lumpy cash flow, it turns a fixed pot of capital into an on-demand buffer.

How drawdown and repayment work

Once the facility is approved, you have a credit limit but no obligation to use it. You draw down only what you need, when you need it, and interest accrues only on the outstanding balance — not on the unused headroom. When customers pay or cash frees up, you repay, and the available limit refreshes.

Most facilities run on a rolling basis with periodic reviews rather than a fixed end date, though some carry a stated maturity. Expect interest charged on drawn funds plus, in many cases, a small non-utilisation fee on the undrawn balance to compensate the lender for holding capital available. Read any agreement carefully so you understand the full cost of access, not just the headline rate.

Revolving facility vs term loan

The right structure depends on whether your need is recurring or one-off. A term loan suits a defined, single purchase with predictable repayments; a revolving facility suits ongoing volatility.

Feature	Revolving facility	Term loan
Access to funds	Draw, repay, redraw	One lump sum
Interest charged on	Drawn balance only	Full principal
Best for	Recurring cash-flow gaps	Single defined purchase
Repayment	Flexible	Fixed schedule
Duration	Often rolling	Fixed term

Many established companies hold both: a term loan for capital projects and a revolving line for day-to-day fluctuations.

What it costs

Costs typically fall into three parts. First, interest on the drawn balance, often a variable rate linked to a benchmark plus a margin. Second, an arrangement or origination fee to set the facility up. Third, a non-utilisation fee on undrawn headroom in some agreements.

Because you pay interest only on what you use, a revolving facility can be cheaper than a term loan when your average usage is well below the limit. The trade-off is that variable rates can move, and per-day interest means the cost of carrying a balance for months adds up. Always model the full cost across a realistic usage pattern rather than judging by the rate alone. See business finance fees explained for a fuller breakdown.

Eligibility and how to apply

Lenders assess the company's trading history, turnover, cash-flow stability and overall creditworthiness rather than the director personally. Credicorp lends to the limited company itself, with no personal guarantee, so directors are not putting personal assets on the line. You'll usually need to be a UK-registered limited company with a demonstrable trading record and recent bank statements or management accounts.

Strong, recent management accounts and a clear sense of how the facility supports your trading cycle will speed underwriting. If a revolving line fits your needs, you can apply online or explore Credicorp Flex, our flexible business credit facility.