Commercial finance · Working capital
Revolving credit facilities: a reusable limit for fluctuating working capital
A revolving credit facility gives a business an agreed borrowing limit that it can draw, repay and redraw under the lender's terms, with interest usually charged on the amount drawn. Ocean Capital Exchange introduces businesses to third-party lenders that provide these facilities.
Definition
What a revolving credit facility is
A revolving credit facility (RCF) is a committed or uncommitted borrowing limit that a business can draw against as needed, repay and, where the agreement allows, draw again during the facility term.
Interest is usually calculated on the drawn balance only, but lenders may also charge an arrangement fee, an annual fee on the full limit, a non-utilisation fee on the undrawn amount or a charge per drawdown.
Redrawing is available only under the agreed terms. Limits can be reviewed, reduced, restricted or withdrawn, expire at the end of the term or become repayable in line with the contract.
At a glance
- Provides
- An agreed limit that can be drawn, repaid and redrawn under contract
- Interest
- Usually on the drawn balance
- Fees
- May apply on the full limit, unused limit or per draw
- Term
- Fixed facility period, often with periodic reviews
- Security
- Varies; debentures or personal guarantees may be requested
- OCE's role
- Introducer to third-party lenders; not a lender
Suitability
Which businesses it tends to suit
A revolving facility suits businesses whose borrowing need rises and falls rather than staying fixed.
Usually a fit
- Trading businesses with seasonal or uneven cash flow.
- Businesses that repeatedly fund stock, payroll timing or supplier payments ahead of receipts.
- Businesses with a reliable source of repayment for each drawing.
- Owners who will monitor the drawn balance and fees actively.
Usually not a fit
- A single long-term investment better matched to a term loan or asset finance.
- Businesses relying on permanently drawn credit to cover ongoing losses.
- Very early-stage businesses without trading records, which lenders may decline.
- Businesses unable to meet reporting, covenant or guarantee requirements a lender sets.
Process
How a revolving credit facility works
Each lender has its own process and documentation. A typical sequence is:
- 01
Define the need
Expected peak borrowing, how often you will draw and how drawings will be repaid.
- 02
Lender assessment
The lender reviews accounts, bank statements, forecasts and credit history.
- 03
Offer and terms
If it decides to lend, the lender sets the limit, term, interest basis, fees, security and conditions.
- 04
Draw
The business requests funds up to the available limit, subject to any drawdown conditions.
- 05
Repay and redraw
Repayments can restore available headroom, and the business may redraw only as the agreement permits.
- 06
Review, renewal or repayment
The lender may review the limit during the term. At expiry the facility may be renewed on new terms or become repayable.
There is no guaranteed revolving access. Availability depends on continuing to meet the agreement's conditions.
Comparison
Revolving credit compared with other working-capital options
These products can address related needs but are not interchangeable. Each has a different cost basis and set of conditions.
| Revolving credit facility | Term loan | Overdraft | Invoice finance | |
|---|---|---|---|---|
| Funding basis | Agreed reusable limit | Lump sum | Limit on a current account | Eligible unpaid invoices |
| Interest | Usually on drawn balance | On the outstanding loan | Usually on overdrawn balance | On funds advanced |
| Other typical fees | Facility, non-utilisation or drawdown fees | Arrangement fee | Arrangement or renewal fee | Service and discount charges |
| Repayment | Per agreement; repaid amounts may be redrawn | Fixed instalments | Often repayable on demand | From customer payments |
| Best fit | Recurring, fluctuating needs | One-off, defined purpose | Short day-to-day gaps | Cash tied up in invoices |
In practice
Typical uses
Common purposes include:
- Seasonal stock
- Buying ahead of a busy period and repaying as sales come in.
- Payroll timing
- Covering wages when customer receipts arrive later in the month.
- Supplier payments
- Paying suppliers on time or taking early-payment terms.
- Contract mobilisation
- Funding start-up costs on new contracts before the first payments.
- Facility limitAssumed figure
- £50,000.00
- Amount drawn (principal)Repayable separately from the costs below; redraw only per contract
- £20,000.00
- Drawn interest at an assumed 12% a year, simple£20,000 x 12% x 90/365
- £591.78
- Facility fee at an assumed 1% a year on the full limit£50,000 x 1% x 90/365
- £123.29
- Non-utilisation fee at an assumed 0.5% a year on the undrawn £30,000£30,000 x 0.5% x 90/365
- £36.99
- Hypothetical total cost for the 90 daysExcludes the £20,000 principal
- £752.06
Hypothetical arithmetic only. The rates, fees and balance are assumptions to show how costs can arise, not advertised lender terms, typical pricing or an eligibility assessment. Real facilities may charge different fees, compound interest or apply minimum charges.
Weighing it up
Benefits and material limitations
Flexibility comes with conditions and costs that apply even when little is drawn.
Benefits
- Matches fluctuating needs
- Draw what is needed, when it is needed, within the agreed limit.
- Interest on drawn balance
- Interest is usually charged only on what is outstanding.
- Reusable headroom
- Repaid amounts may be redrawn during the term, as the agreement allows.
Material limitations
- Fees on unused limit
- Facility or non-utilisation fees can apply even when nothing is drawn.
- Limits can change
- Lenders may review, reduce, restrict or withdraw the limit under the contract.
- Expiry and repayment
- The facility may end at term or become repayable, and renewal is not guaranteed.
- Covenants and reporting
- Breaching conditions can restrict drawings or trigger repayment.
- Security and guarantees
- Debentures or personal guarantees may be requested.
- Persistent drawing
- A balance that never falls can cost more than a term loan.
Why Ocean
A reusable limit matched to how your working capital moves
Ocean looks at how often the business needs funds, how large the peaks are and how each drawing will be repaid before introducing relevant third-party lenders from our panel.
Industry context, not just an application form
We discuss how your business trades, when money comes in and what the funding must achieve, so sector-specific cash-flow pressures form part of the conversation.
Access to a wide panel
Ocean works with a wide panel of third-party lenders and specialist finance providers. That gives you options beyond one bank's product range, subject to provider appetite and eligibility.
The product should fit the business
We help establish whether a loan, invoice facility, asset funding or another structure fits the requirement, rather than starting with whichever product a single bank has available.
Compare the terms that matter
Look beyond a headline rate. We help you understand the fees, repayment pattern, security, guarantees and exit conditions relevant to the options being discussed.
Less repeated legwork
A central point of contact helps organise the initial enquiry and information for relevant providers. It can reduce repeated explanations, although lenders may still require their own applications and checks.
Help asking the right questions
We help clarify what providers need and what to check before proceeding. You retain control of the decision and can take independent legal, financial or tax advice where needed.
For this product
Compare drawn interest with the fees on the limit
Interest usually depends on the drawn balance, but facility, non-utilisation and drawdown fees can make an oversized limit expensive. We help you compare those costs and ask about review, renewal, expiry and repayment conditions. Redrawing is available only under the agreed terms, and limits may be reviewed, restricted or become repayable under the contract. If cash is tied up in invoices, or the need is a one-off purchase, we can discuss whether invoice finance or a term loan is more relevant.
Ocean Capital Exchange acts as a broker and introducer, not a lender. We do not make lending decisions or guarantee that a provider will make an offer. Introductions are limited to providers available through our panel; each provider sets its own eligibility, terms and credit decisions.
Meet the Ocean team · Read our company and provider disclosures
Due diligence
What lenders assess
Each lender applies its own criteria. Areas commonly reviewed include:
- Trading history
- How long the business has traded and its track record.
- Cash-flow pattern
- How the need fluctuates and how drawings will be repaid.
- Profitability
- Accounts, management figures and forecasts.
- Credit history
- Business and directors' credit records.
- Existing debt and security
- Other borrowing, charges and commitments.
Information often requested
- Recent business bank statements
- Filed accounts and up-to-date management accounts
- Cash-flow forecast showing expected drawings and repayments
- Details of existing borrowing and charges
- Directors' details for credit checks
Indicative only. Lenders set their own requirements. Ocean Capital Exchange does not make lending decisions.
Pricing structure
Costs and repayment
Pricing is quote-specific and can include charges beyond interest. Look for:
- Interest on drawn balance
- Usually a margin over a reference rate or a fixed rate, charged on the amount outstanding.
- Arrangement fee
- Charged when the facility is set up, sometimes deducted from the first drawing.
- Facility or commitment fee
- May be charged on the full limit, regardless of use.
- Non-utilisation fee
- May be charged on the undrawn part of the limit.
- Drawdown or transaction fees
- May apply per drawing.
- Renewal and review fees
- May apply when the facility is reviewed or renewed.
Repayment and settlement
- Drawings are repaid on the dates or within the periods the agreement sets.
- Repaid amounts may be redrawn only under the agreed terms and while conditions are met.
- The lender may review, restrict or reduce the limit as the contract allows.
- At expiry, or on certain events, the outstanding balance may become repayable in full.
Checklist for comparing quotes
- 1.Interest basis on drawn balances
- 2.Fees on the full limit, unused limit and each drawdown
- 3.Review, renewal and expiry terms
- 4.Conditions that can restrict drawings or require repayment
- 5.Security and guarantee requirements
- 6.Total cost at your expected average drawn balance
Cost illustration
Estimate the cost of a revolving credit facility
Use Quick estimate to compare illustrations for strong, moderate and challenged financial profiles, or Compare my quote to enter a provider's actual interest rate and fees. The calculator assumes a constant drawn balance for the period; it is not a time-varying draw schedule and does not model repayments and redraws. Results are not APR comparisons or provider offers, and finance is subject to provider approval.
Illustrative example only
Your actual quote may be entirely different after a lender or finance provider reviews your financial information and funding requirements. These figures are not a lending decision or an offer of finance.
Your estimate
Enter your amount you expect to draw to see an estimate.
0 of 1 required figures entered
Drawn interest and facility fees
Enter your assumed credit limit, amount drawn, duration in days, annual interest on amount drawn, annual facility fee on full limit, annual charge on unused facility, fixed additional fees to see the breakdown.
0 of 7 required figures entered
Illustrative only, not a binding finance offer. Costs vary by lender and applicant; additional fees may apply and eligibility is subject to assessment. Ocean Capital Exchange is an introducer, not the lender. Approval, credit limits, security and redraw conditions are subject to the provider's assessment and agreement. How this calculator works.
Discuss a revolving credit facility
Speak to our team whenever you’re ready. You don’t need to complete this calculator to discuss your options or request a quote.
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Revolving credit facility questions
Still unsure? Call +44 20 7183 2026.
Can I always redraw what I repay?
Only under the agreed terms. The lender may restrict drawings, review or reduce the limit, and the facility can expire or become repayable under the contract.
Do I pay interest on the full limit?
Interest is usually charged on the drawn balance, but facility, non-utilisation or drawdown fees can apply to the full or unused limit.
How is it different from an overdraft?
Both provide a limit, but overdrafts are attached to a current account and are often repayable on demand. Revolving facilities usually have a set term, documentation and fee structure.
Should I use it instead of a term loan?
A term loan often suits a single defined purpose. A revolving facility suits recurring, fluctuating needs. A balance that stays fully drawn may be better served by another structure.
Is security required?
It depends on the lender. Debentures or personal guarantees may be requested. Take independent legal advice before giving a guarantee.
What happens at the end of the term?
The lender may offer renewal on new terms or require the outstanding balance to be repaid. Renewal is not guaranteed.
Can the calculator model my drawing pattern?
No. It assumes a constant drawn balance. Use it as a rough guide and ask lenders to illustrate costs for your expected drawings.
Independent background reading
These independent sources explain general concepts. They do not endorse Ocean Capital Exchange or confirm our providers, product availability or terms. Your provider’s agreement takes precedence over an illustration.
Important information
Ocean Capital Exchange Ltd introduces businesses to third-party providers of revolving credit facilities. We are not a lender, do not make credit decisions and do not guarantee that finance will be offered or on what terms. Any facility is subject to the provider's own assessment, due diligence, approval and documentation.
Facility limits may be reviewed, reduced, restricted or withdrawn, and balances may become repayable under the agreement. Redrawing is available only under the agreed terms. Personal guarantees can make individuals liable for business debts; take independent legal advice before giving one.
This page is general information, not financial, legal or tax advice. Worked examples and calculator results are hypothetical arithmetic based on assumed or visitor-entered figures; they are not quotes, offers, advertised lender terms or typical pricing. Business finance may require security or personal guarantees. Read any agreement carefully and take independent advice where appropriate.
Apply for a revolving credit facility
Tell us your expected peak borrowing and how drawings will be repaid. We can explain the considerations and introduce suitable third-party lenders.
- Or call
- +44 20 7183 2026
- Office
- 73 Watling Street, London, EC4M 9BJ