Revolving credit facility
A credit limit you can draw on, repay and draw again, paying interest only on what you use. It is quick and flexible for short-term needs, but usually costs more than a term loan.
- Personal guarantee likely
How it works
A lender agrees a credit limit. You draw money into your bank account when you need it, repay it on the agreed schedule, and can then draw it again. It is also called a line of credit or a working capital line.
- Interest: you pay only for the money you have drawn, for the days you have it.
- Repayments: usually daily, weekly or monthly.
- Length: facilities for smaller businesses usually run for three months to two years, and can often be extended if you have kept up repayments.
- Security: many lenders to small businesses do not ask for assets, but may ask for a personal guarantee. Larger facilities from banks are often secured on the business's assets.
- Who can get one: usually limited companies. Sole traders may find it harder.
Unlike an overdraft, it is separate from your current account. Unlike a credit card, there is no card: money is paid into your account.
Upsides and downsides
Upsides
- Draw money only when you need it, and pay interest only on what you use
- Once repaid, the money can be used again
- Decisions can be quick, sometimes the same day
- Often no security on business assets
Downsides
- Usually more expensive than a term loan
- Set-up fees, and extra charges for late repayment
- A personal guarantee may be needed
- Not meant for long-term funding
Risks
- Relying on it for long-term needs, which gets expensive
- Being personally liable under a guarantee
- Late repayments damaging your business credit score
What it costs
- How it is priced
- Interest on the amount drawn, plus set-up and other fees
- Costs that are easy to miss
- Set-up or arrangement fees
- Extra interest or charges if a repayment is late
- Interest rates are often higher than on term loans
Set by the lender from your turnover, cash flow and credit record.
Does it fit?
Could fit when
- You have short, uneven gaps between paying out and getting paid
- You are a trading limited company and want funds ready when you need them
Unlikely to fit when
- You need long-term money for a big purchase you will pay off over years
- You are a sole trader or partnership (most lenders offer these to companies)
Who can use it
- Business types: Private limited company, LLP, Public limited company
- Needs sales (revenue)
Am I ready?
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- Recent accounts and bank statements
- Cash flow forecast
- A clean credit record
Regulation and protections
Many smaller businesses can take an unresolved complaint about a bank or other financial firm to the Financial Ombudsman Service. A small business qualifies if its annual turnover is under £6.5 million and it either has a balance sheet total under £5 million or employs fewer than 50 people.
Types of provider: High-street and challenger banks; Online business lenders.
Also consider
Sources
- British Business Bank: What is a revolving credit facility? · checked 7 October 2026
- British Business Bank: Working capital finance options · checked 7 October 2026
- Financial Ombudsman Service (small business): Who we can help · checked 7 October 2026