What Is a Revolving Credit Facility?
A revolving credit facility works like a business overdraft with much higher limits. You can borrow money when you need it and pay it back when cash flow improves.
Think of it as a financial safety net. The facility sits there ready to use whenever your business needs it.
How Revolving Credit Facilities Work
The Basics
- Credit Limit: Borrow between £25,000 and £100,000
- Flexible Access: Draw funds on demand via an online platform
- Interest Only: Pay interest solely on the amount you use
- Maximum Term: 90 days per individual drawdown
- Zero Standby Fees: No charges when the facility isn't being used
Monthly Interest Structure
Interest charges apply only to your outstanding balance. If you borrow £30,000 for two weeks, you pay interest for just those 14 days.
The monthly interest rate varies based on your business profile and risk assessment. Most facilities range from 2% to 8% per month on the outstanding balance.
Who Benefits Most from Revolving Credit?
Seasonal Businesses
Summer Tourism Operators: Restaurants, hotels, and tour companies often need cash during the quiet winter months. A revolving facility bridges the gap between seasons.
Retail Businesses: Christmas toy shops or garden centres face massive seasonal variations. This funding smooths cash flow during off-peak periods.
Construction Companies: Weather-dependent businesses can't always predict when projects will be completed. Revolving credit covers payroll during delays.
Businesses with Credit Challenges
Traditional bank lending often rejects businesses with:
- Recent Late Payments: Even minor credit blips can block bank applications
- Limited Trading History: New businesses struggle with conventional lenders
- Industry Concerns: Some sectors face automatic rejection from high street banks
Revolving credit providers focus on future cash flow potential rather than past credit issues.
Companies Needing Quick Access
Emergency Equipment Repairs: When critical machinery breaks down, businesses need immediate funding for replacements.
Sudden Opportunities: Last-minute contracts or bulk purchase discounts require fast access to working capital.
Cash Flow Gaps: Late customer payments shouldn't prevent you from meeting supplier obligations.
Eligibility Requirements Made Simple
Basic Criteria
- UK Limited Company: Must be registered with Companies House
- Minimum Revenue: £100,000 annual turnover (can be projected for new businesses)
- Business Purpose: Funds for legitimate commercial activities only
- Age Requirement: Directors must be 21 or older
No Complex Documentation
Unlike traditional bank loans, revolving facilities don't require:
- Audited Accounts: Basic management accounts suffice
- Detailed Business Plans: A Simple application form covers the requirements
- Multiple Bank Statements: Recent statements show cash flow patterns
- Extensive Credit Checks: Focus on the current situation rather than historical issues
Supported Personal Guarantee Requirements
A supported personal guarantee uses your property as security. Here's how it works:
Example Calculation:
- House Value: £500,000
- Outstanding Mortgage: £200,000
- Available Equity: £300,000
- Maximum Facility: £100,000 (typically 30-50% of available equity)
This approach allows businesses with limited company assets to access higher credit limits.
The True Cost of Revolving Credit
Interest-Only Structure
Traditional business loans require monthly principal and interest payments. Revolving credit charges interest only on outstanding balances.
Monthly Payment Example:
- Amount Drawn: £50,000
- Interest Rate: 4% per month
- Monthly Interest: £2,000
- Principal Repayment: When cash flow permits
Zero Utilisation Fees
Many lenders charge monthly fees whether you use the facility or not. Revolving credit providers typically waive these standby charges.
Annual Saving Example:
- Facility Limit: £75,000
- Unused for 6 months
- Typical Bank Facility Fee: 1% annually (£750)
- Revolving Credit Fee: £0
Application Process Simplified
Step 1: Initial Assessment (24 Hours)
Complete the online application form with basic business information. Initial approval decisions happen within one working day.
Step 2: Documentation Review (2-3 Days)
Submit recent management accounts and bank statements. The underwriting team reviews your cash flow patterns and business model.
Step 3: Security Valuation (1-2 Days)
Property valuations ensure adequate security for the supported personal guarantee. This usually happens via desktop valuation to save time.
Step 4: Legal Documentation (3-5 Days)
Solicitors prepare the facility agreement and guarantee documents. Most paperwork can be signed electronically.
Total Timeline: 2-4 weeks from application to funds available.
Managing Your Revolving Facility
Online Platform Access
Modern revolving credit facilities provide 24/7 online access for:
- Balance Monitoring: Real-time view of available credit
- Drawdown Requests: Instant access to funds (usually same-day transfer)
- Repayment Scheduling: Flexible repayment dates to match cash flow
- Interest Calculations: Transparent daily interest accruals
Repayment Flexibility
Unlike fixed-term loans, revolving facilities adapt to your business cycle:
- Quiet Periods: Make interest-only payments
- Busy Seasons: Repay capital when cash flow strengthens
- Emergency Needs: Draw additional funds instantly
- Surplus Cash: Reduce the outstanding balance to save interest
Common Concerns Addressed
"Will This Affect My Credit Rating?"
Responsible use of revolving credit can actually improve your business credit score. Regular payments and facility management demonstrate financial discipline to future lenders.
"What Happens If I Can't Pay?"
The supported personal guarantee provides security, but lenders prefer to work with businesses facing difficulties. Most providers offer:
- Payment Holidays: Temporary relief during genuine hardship
- Restructuring Options: Extended terms or reduced payments
- Business Support: Connections to turnaround specialists
"Is My House Really at Risk?"
Property security is a last resort. Lenders want their money back, not your home. The legal process for property recovery typically takes 18 to 24 months, providing time to resolve issues.
Alternatives to Consider
Asset-Based Lending
If your business owns significant assets, asset-based lending might offer lower costs. However, these facilities often require more documentation and longer approval times.
Invoice Finance
Businesses with strong debtor books might prefer invoice financing. This option advances cash against outstanding customer invoices.
Traditional Bank Overdrafts
High street banks offer cheaper rates but much lower limits (typically £10,000-£25,000). Application processes are also more demanding.
Making the Decision
When Revolving Credit Makes Sense
- Unpredictable Cash Flow: Seasonal or project-based income patterns
- Growth Opportunities: Quick access is needed for time-sensitive deals
- Credit Constraints: Traditional lenders have declined applications
- Simplicity Required: No time for complex loan applications
When to Consider Alternatives
- Stable Cash Flow: Predictable income might suit traditional loans better
- Lower Requirements: Smaller funding needs could use overdrafts
- Longer Terms: Major investments might need 3-5 year business loans
Next Steps for Your Business
Preparation Checklist
Before applying, gather these documents, NOT needed unless you have them:
- Latest Management Accounts (last 12 months if available)
- Bank Statements (previous 3 months for all business accounts)
- Director Information (proof of identity and address)
Questions to Ask Potential Lenders
- What is the maximum facility size for my business?
- How quickly can funds be accessed once approved?
- Are there any hidden fees or charges?
- What happens if I need to increase the facility limit?
- Can the personal guarantee be reduced as the business grows?
