The revolving credit facility (also called working capital loan) is the overdraft for the company: quick help in case of short-term or unforeseen liquidity gaps. It is therefore a standard instrument of corporate financing. However, finding the right revolving credit facility and provider for your own business needs is not so easy.
Very high flexibility in terms of drawdown and repayment
Helps to bridge liquidity bottlenecks immediately and without much effort (once in place)
Available again immediately after repayment
No financing can be drawn and repaid as quickly as the revolving credit facility. And yet it can only ever be one building block in a company’s financing strategy – because the revolving credit facility is primarily intended for short-term financing. We support you in selecting the right bank with the right structure for you, even beyond your house bank.
Revolving credit facility: fast liquidity injection
What the overdraft facility is for private customers, the revolving credit facility or working capital loan offers business customers: Immediate availability as soon as the loan is needed – for example, to bridge a short gap between expenditure such as salaries and customer invoices. Ever so quickly the loan can be repaid. There is no need for a separate loan account; the revolving credit facility is managed via a current account. Unlike other loan types, there is no fixed repayment schedule or tenor.
However, the amount of the drawing limit (credit line) for the revolving credit facility, the interest rate and possible collateral must be agreed with the bank in advance. Pricings depend not least on the business risk of the company, for example cycliclity or seasonality.
Extension of the existing revolving credit facility possible
As soon as the current account has a negative balance, the revolving credit is drawn down and interest is charged accordingly. Interest is only charged for the period in which the account is “in the red”. The loan can be repaid in full or in part at any time. Even after repayment, the revolving credit is immediately available again and does not have to be applied for again, as is typical for other forms of loans.
It is sometimes also possible for a revolving credit to be extended beyond the agreed limit if the lending bank agrees and/or a new bank can be onboarded as a financing partner.
Typically, the bank expects the loan to be repaid in full within a certain period – usually after one month. The size oft he revolving credit line is often based on this expectation – the higher the regular payments on the account, the higher the line usually is. If the revolving credit is not repaid over a longer period of time, the bank could freeze the corresponding account.