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Revolving credit facilities

What is a revolving credit facility?

A revolving credit facility is an agreed borrowing limit a business can draw down, repay and redraw as often as it likes within the term, paying interest only on the balance actually outstanding. It suits uneven cash flow, stock purchasing and gaps between invoices far better than a term loan, because money not drawn costs nothing beyond any non-utilisation fee. It is a poor fit for a single large capital purchase, where a term loan or asset finance is cheaper.

Updated . Lendus is an introducer, not a lender.

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How it works

  1. 01 The business agrees a maximum borrowing limit with the lender, based on turnover and affordability, in much the same way a term loan would be assessed.
  2. 02 The business draws down any amount up to that limit whenever it is needed, and repays it whenever cash allows, rather than following a fixed repayment schedule.
  3. 03 Interest is charged only on the amount actually drawn, not the full limit, though many facilities also charge a non-utilisation fee on the undrawn portion.
  4. 04 The lender reviews the facility periodically, usually annually, and can increase, reduce or withdraw the limit based on how the business is trading.

What lenders typically look for

What to watch for

The interest-only-on-what-you-draw structure is genuinely useful for uneven cash flow, but two things catch businesses out. First, many facilities charge a fee on the undrawn balance regardless of use, so an oversized limit taken out of caution can cost money sitting idle. Second, the limit is not fixed for the life of the facility: lenders review it periodically and can reduce or withdraw it if trading weakens, sometimes at the exact moment the business needs it most.

Lenders on our panel

Lender Facility size Published rate Minimum trading
Aldermore Bank £2k–£10m 4.5%–20% 12+ months for most products
Allica Bank £25k–£15m 9.90%–13.75% 3+ years of filed accounts for unsecured business loans; 2+ years of financial accounts for commercial mortgages
Bibby Financial Services £50k–£15m 1%–3% 6+ months preferred; startups with strong order books considered
Bizcap £10k–£500k 1.5%–5% At least 4 months
Capify £4k–£500k 1.1–1.5 4+ months for merchant cash advance; 6+ months for business loan
Capital on Tap £1k–£250k 1.25%–3% 12+ months
Close Brothers £10k–£5m 5%–18% 24+ months
Cynergy Business Finance £200k–£40m Not published Not publicly stated by Cynergy Business Finance. Eligibility appears to be assessed on the strength of the underlying receivables, stock, property or other assets on a per-business basis rather than against a published minimum years-trading threshold.
Fleximize £5k–£500k 0.9%–3.9% 6+ months
Funding Circle £10k–£500k 6.9%–36% 1+ year
Investec £5k–£100m Not published Not publicly stated. Investec assesses each business individually rather than publishing a minimum trading history requirement.
iwoca £1k–£500k 2%–6% 3+ months
Kriya £50k–£1m Not published Minimum 12 months trading with at least one set of financial accounts filed for invoice finance and working capital loans. Kriya's PayLater product has a lower minimum of 3 months trading.
LendingCrowd £25k–£500k 6%–18% 24+ months
Nucleus Commercial Finance £3k–£2m 1.5%–5% 6+ months
OakNorth Bank Not published Not published No fixed minimum published; trading history is one of several factors assessed case-by-case
Paragon Bank £5k–£1m Not published Not publicly stated; assessed as part of underwriting.
Shawbrook Bank £50k–£25m 0.55%–1.25% 12+ months preferred; none required for property-backed bridging
Start Up Loans £1k–£25k 7.5%–7.5% For start-ups: no trading history required. For existing businesses: must have been trading less than 60 months
ThinCats £1m–£30m Not published Not stated as a fixed minimum number of years; ThinCats lends to established mid-sized SMEs rather than start-ups or very early-stage businesses.
Tide £1k–£500k 7.9%–49.9% 12+ months for credit products; account available from day one
White Oak UK £5k–£500k Not published Not publicly stated; assessed as part of underwriting.

As published by each lender and dated on its own page. Indicative, not offers.

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Frequently asked questions

How is interest charged on a revolving credit facility?
Only on the amount actually drawn down at any given time, which is the main advantage over a term loan. If a business has a £100,000 limit but has only drawn £20,000, interest is calculated on the £20,000, not the full limit. As the balance is repaid, interest reduces accordingly, and it rises again on any fresh drawdown. The exception to watch for is a non-utilisation fee, charged by many lenders on the undrawn portion of the limit specifically to compensate for the capital they are holding available but not currently lending out.
What is a non-utilisation fee?
A charge some lenders apply to the portion of a revolving credit limit that is not currently drawn down, on top of the interest charged on whatever balance is outstanding. It exists because the lender has to hold that capital available for the business to draw on demand, which has a cost even when nothing is borrowed. It means taking out a larger limit than the business realistically needs, purely as a buffer, is not free, and the size of the limit requested is worth thinking through rather than simply asking for the maximum on offer.
Can the lender reduce my credit limit?
Yes. Revolving facilities are reviewed periodically, commonly once a year, and the lender can increase, reduce or withdraw the limit based on how the business has been trading since the last review. This differs from a term loan, where the amount and schedule are fixed at the outset and cannot be unilaterally changed by the lender. A limit reduction can arrive at an awkward time if the business has come to rely on the facility being available, which is why it is worth treating a revolving limit as a flexible tool rather than a guaranteed source of funds.
Is a revolving credit facility better than a business loan?
It depends what the money is for. A revolving facility suits uneven cash flow, seasonal stock purchasing or bridging gaps between invoices being raised and paid, because money not drawn costs little or nothing beyond any non-utilisation fee. For a single, known capital purchase, such as a piece of equipment or a one-off expansion cost, a term loan or asset finance is usually cheaper and simpler, because the whole amount is needed at once rather than drawn flexibly. The two suit different cash flow patterns rather than one being straightforwardly better than the other.
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