Revolving Credit Facilities
Revolving Credit Facilities
Revolving credit facilities are a type of Working Capital Finance. Funds are normally pre-approved and interest is usually charged on the outstanding amount.
How does a revolving credit facility work?
Revolving credit facilities are not fixed facilities but rather rolling agreements that don’t have a fixed number of payments, in contrast to instalment credit.
Terms may vary, but usually the facilities will define how long after you drawdown a facility, you need to repay and a maximum limit will be in place. Usually, once you’ve repaid a certain amount of money, you can withdraw more — hence the term ‘revolving’. The simplest way to think about revolving credit facilities is that they’re effectively a type of loan that can be automatically renewed.
It is an arrangement which allows for the loan amount to be withdrawn, repaid, and redrawn again in any manner and any number of times, until the arrangement expires. Credit card and overdrafts are examples of revolving credit.
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