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Structure of a revolving credit facility
An RCF sets a maximum limit your company may borrow at any time. Within that limit, you draw funds as needed and repay when cashflow allows. Once repaid, that headroom is immediately available to draw again — hence 'revolving'. The facility has a defined term at the end of which the outstanding balance must be repaid in full or the facility renegotiated.
Interest accrues only on the outstanding drawn balance, typically at a variable rate above a reference rate. A commitment fee is often charged on the undrawn portion, which compensates the lender for keeping the capital available. These figures are indicative and not a quote.
How an RCF differs from an overdraft
Both products are revolving, but there are material differences. A bank overdraft is typically repayable on demand — the bank can withdraw it at short notice. An RCF is usually a committed facility, meaning the lender is contractually obliged to honour drawdowns up to the limit throughout the term, subject to no event of default occurring.
RCFs also tend to carry more formal documentation (a facility agreement with covenants and representations) and are more commonly provided by specialist commercial lenders rather than clearing banks. For a growing business that needs certainty of access to working capital, a committed RCF offers more security than an overdraft.
When to use a revolving credit facility
An RCF suits companies whose funding needs are recurring but irregular: businesses with seasonal peaks, contractors managing lumpy payment profiles, importers timing currency purchases, or firms carrying out multiple small projects in sequence. It is also useful as a standby facility — providing headroom for opportunities or emergencies without the cost of holding an unused term loan.
- Seasonal stock build-up and drawdown → RCF
- Payroll or VAT timing gaps → RCF or working capital loan
- One-off capital investment → asset finance or term loan
- Steady, predictable financing need → fixed-term loan may be lower cost
Frequently asked questions
Does a revolving credit facility appear on the balance sheet?
The drawn balance appears as a liability. The undrawn commitment may require disclosure in the notes to the accounts depending on materiality and the accounting standard your company uses (FRS 102 or IFRS). Your accountant will advise on presentation.
What covenants are typical on an RCF?
Common financial covenants include minimum interest cover (EBIT / interest expense), maximum leverage (net debt / EBITDA), and minimum net worth. Maintenance covenants are tested quarterly or semi-annually. Breaching a covenant does not automatically accelerate the debt but gives the lender the right to do so — prompt dialogue with the lender at the first sign of covenant pressure is essential.
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.