Revolving Credit Facility UK

A revolving credit facility is a flexible working-capital line. The lender agrees a limit, and within it you draw funds when you need them, repay when cash comes in, and draw again, much like an overdraft but structured as a committed facility for an agreed term, typically one to three years. You pay interest only on the amount actually drawn, plus a commitment fee on the undrawn portion, so an unused facility is cheap to hold and there to be used the moment a gap opens up.

The pricing has two parts and it is worth understanding both. The margin is charged on the drawn balance, usually as a percentage over a reference rate, and is what you pay for the money you are actually using. The commitment or non-utilisation fee is charged on the part of the limit you are not using, usually a fraction of the margin, and is what you pay to keep the line available. Some facilities also carry an arrangement fee at the outset. Because you only pay the full margin on what you draw, an RCF is efficient for a business whose need moves up and down through the month or the season.

Many RCFs include a clean-down requirement: a short period each year, often a set number of consecutive days, during which the drawn balance must fall to zero or below an agreed floor. The point is to prove the facility is genuinely funding working-capital swings rather than quietly becoming permanent debt the business cannot repay. If your need is really for a permanent layer of funding, a term loan is the more honest structure, and we will say so.

The obvious comparison is the overdraft, and the difference matters. An overdraft is usually repayable on demand and can be reduced or withdrawn by the bank at short notice, whereas an RCF is committed for its term, so the availability is contractual and more dependable for planning. Against a term loan, the trade is flexibility for structure: a term loan gives you a lump sum repaid on a fixed schedule, while an RCF gives you a reusable limit you dip in and out of. Where your requirement is broader than a single revolving line, our working capital finance page covers the wider set of options.

We are a commercial finance broker, not a lender, so we do not set the limit, the margin or the covenants; the lender does, on your accounts, affordability and the stability of your cash flow. What we do is match your business to lenders whose appetite for revolving facilities fits your size and sector. Sector detail sits on our pages for recruitment agencies, professional services, creative and marketing agencies, and wholesale.