All funding products

Revolving credit facility.

A revolving credit facility gives your business a pre-agreed borrowing limit you can draw on, repay, and draw on again — as many times as you need within the facility term. You only pay interest on what you've actually drawn. It is the closest thing to an overdraft that most businesses can get from a non-bank lender, and for managing ongoing working capital it is usually more appropriate than a term loan.

The basics

What is a revolving credit facility?

The lender agrees a limit — say £500,000. You can draw any amount up to that limit at any point during the facility term. When you repay, that capacity is restored and available to draw again. You pay interest only on the balance outstanding on any given day, not on the full limit.

In this way it behaves like an overdraft: flexible, reusable, and interest-efficient if managed well. The key differences from a bank overdraft are that revolvers are typically larger, have defined terms (usually 12–36 months), and are more formally documented — but they're also more widely available, since non-bank lenders offer them alongside the clearing banks.

A revolver is distinct from a term loan in one critical respect: a term loan is drawn once and repaid on a fixed schedule. A revolver is drawn and repaid repeatedly. If your funding need is genuinely recurring — seasonal stock builds, bridging invoice cycles, managing payroll against slow-paying clients — a revolver is almost always the right structure. A term loan for the same purpose just means you're paying interest on money you're not using.

Fit

When it works well.

A revolving credit facility suits a specific pattern of business need. It works when:

• Cash flow is lumpy but predictable — seasonal peaks, invoice timing, stock cycles.
• The need is ongoing rather than one-off. You'll need headroom this quarter, next quarter, and the one after.
• You want to pay interest only when you're actually using the money, rather than carrying a fixed loan balance.
• Your business is profitable and well-established enough that a lender can assess serviceability with confidence.
• You want flexibility to draw and repay on your own schedule rather than being locked into fixed instalments.

Common users include retailers and wholesalers managing seasonal stock, professional services firms bridging between project completions and client payments, and manufacturers covering material costs ahead of shipment. It's also frequently used alongside invoice finance — the revolver provides a buffer for non-invoice costs while the invoice facility funds the receivables ledger.

The honest part

When another product fits better.

A revolver is not always the answer, and it gets misused more often than people admit.

• If you have a single defined investment to make, a term loan is simpler and probably cheaper. A revolver is designed for recurring needs; using one for a one-off capex purchase means paying a commitment fee on headroom you'll never use again.
• If your cash flow problem is structural rather than timing-related, a revolver makes it worse. Drawing on a revolver to cover losses is a path to a debt pile, not a solution. Lenders will spot this at annual review and withdraw the facility — usually at the worst moment.
• If your business is pre-profit or early-stage, most revolving credit providers won't lend. The product assumes serviceability — a business that makes money and has predictable cash flows. Without that, the underwriting doesn't stack up.
• If you primarily need funding against invoices, invoice finance is more efficient. It scales with your ledger, and availability rises automatically with sales. A revolver has a fixed cap and no automatic headroom growth.

There's also a subtler risk: revolvers feel like permanent working capital. They're not. Annual reviews are standard, and lenders can reduce limits, add covenants, or exit the facility entirely at review. Businesses that build their operating model around a revolver being available at full limit indefinitely occasionally find themselves short.

Cost

Real costs.

Revolving credit pricing has two components: the interest rate on drawn balances, and a commitment fee on the undrawn portion.

Component	Typical range
Interest on drawn balance — bank / well-secured	7–10% APR
Interest on drawn balance — non-bank / unsecured	12–18% APR
Commitment fee on undrawn limit	0.5–2% per year
Arrangement fee	0.5–1.5% of facility limit
Annual review fee	£500–£2,000

The commitment fee is the cost people most often overlook. On a £500,000 facility with a 1% commitment fee, you pay £5,000 per year just to have the headroom available — regardless of whether you draw on it. That's the price of flexibility, and it's worth paying if you genuinely need it. It's not worth paying if the facility sits unused.

Revolvers vs overdrafts

Why not just get a bank overdraft?

A bank overdraft is structurally similar to a revolving credit facility — both are flexible, reusable limits. But there are three practical problems with relying on overdrafts for SME working capital.

First, banks have been steadily reducing overdraft availability for SMEs since the financial crisis. Limits that existed for years have been reduced or removed at review with limited notice. Many businesses that previously used an overdraft as core working capital have found it withdrawn.

Second, bank overdrafts are typically repayable on demand. The bank can call the overdraft with very short notice — sometimes 24 hours. A revolving credit facility from a non-bank lender is more formally documented and gives the borrower more defined rights around notice and termination.

Third, overdraft limits for SMEs tend to be small relative to need. A business that needs £500,000 of working capital headroom is unlikely to get that on an overdraft from a clearing bank. The non-bank revolving credit market fills this gap.

The honest counterpoint: if you can get a bank overdraft at the right size, it's often the cheapest form of flexible working capital available. Use it if you have it.

Operational reality

Speed, complexity, certainty, flexibility.

Speed

Setup takes 1–4 weeks depending on size and lender. Once the facility is in place, draws are fast — same day or next day in most cases. This is one of the product's real strengths: when you need working capital in a hurry, you don't have to start an application from scratch.

Complexity

Moderate. You'll need to provide management accounts, bank statements, and cash-flow forecasts. The lender will want to understand the business model and the drivers of the cash-flow cycle. Larger facilities or those with security attached will require more documentation. Annual reviews add an ongoing administrative requirement.

Certainty

Good in the short term, less so over time. Once the facility is agreed and drawn, repayment terms are clear and predictable. The uncertainty comes at annual review — limits can be reduced, covenants tightened, or facilities not renewed. Treat the annual review as a repeat credit application and prepare accordingly.

Flexibility

High — this is the defining feature of the product. You control the timing and size of draws within the agreed limit. There is no fixed repayment schedule; you repay when cash allows and redraw when you need to. This flexibility comes at a cost (the commitment fee and a higher interest rate than a secured term loan) but for businesses with variable cash-flow needs it is usually the right trade-off.

Other options

Alternatives.

• Bank overdraft — cheaper if you can get it at the right size, but increasingly hard for SMEs to secure and repayable on demand.
• Invoice finance — better if the cash-flow problem is specifically driven by waiting to be paid by B2B customers. Scales automatically with your ledger rather than having a fixed cap.
• Term loan — more appropriate if you have a single defined investment. Lower interest rate, no commitment fee, but none of the draw-and-repay flexibility.
• Asset-based lending — for larger businesses with significant assets across multiple categories. ABL provides a revolving facility but sized dynamically against receivables, stock, and property — more complex, but potentially larger and better secured.
• Trade finance — if the specific need is funding the gap between paying overseas suppliers and receiving customer payment, trade finance is more precisely fitted to that cycle.

Summary

Summary.

A revolving credit facility is the right product for businesses that need flexible, reusable working capital headroom — not a one-off injection of cash, but a standing facility they can draw and repay as their cash flow demands. It's more widely available and often better structured than a bank overdraft, and more appropriate than a term loan for recurring working capital needs.

It works for profitable, established businesses with predictable cash-flow cycles. It doesn't work as a substitute for profitability, and it isn't permanent — treat annual reviews seriously.