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How each product is structured
A term loan advances a single agreed sum on day one. Your company repays capital and interest in scheduled instalments — monthly in most cases — over a defined term, commonly two to seven years. The facility closes once the final payment lands.
A revolving credit facility sets a credit limit your directors can draw against repeatedly. You repay what you use, interest accrues only on the outstanding balance, and the limit refreshes automatically. It is structurally closer to a commercial overdraft than to a loan.
When a term loan is the stronger choice
Term loans are best matched to a specific, bounded purpose: a machinery purchase, a leasehold fit-out, an acquisition. The fixed repayment schedule makes cash-flow modelling straightforward, and lenders often price them more keenly than revolving products because the drawdown risk is known from the outset.
If your company has a clear project cost and a predictable repayment timeline, a term loan keeps the debt contained.
When a revolving facility earns its place
Revolving facilities suit seasonal businesses, companies that carry debtors on extended payment terms, or any director who needs a capital buffer without the drag of paying interest on money not yet drawn. Stock purchases, bridging invoice gaps, and opportunistic supplier payments are typical use cases.
The flexibility carries a cost: facility fees usually apply whether the limit is used or not, and drawn balances attract interest from day one of each draw.
Running both products simultaneously
Many growing limited companies maintain a term loan for a capital project alongside a revolving facility for day-to-day liquidity. Lenders assess both facilities together when calculating total exposure, so directors should model the combined debt-service cover before approaching either product.
Frequently asked questions
Can a limited company switch from a revolving facility to a term loan mid-way through?
Some lenders offer a term-out option that crystallises the outstanding revolving balance into a fixed term loan. This is a separate credit decision and is not automatic — it requires a new application.
Does a revolving credit facility appear as debt on the balance sheet?
Any balance drawn at the reporting date appears as a liability. An undrawn revolving facility is a contingent commitment and is disclosed in the notes, not on the face of the balance sheet.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.