Revolving line of credit

A revolving line of credit is a type of working capital finance that enables you to withdraw money as and when you require it, and repay whenever is easiest for you. It’s a popular finance solution amongst businesses that need to boost their working capital, and it can be used as short term financing that you plan to pay off quickly.

Like a flexible, open-ended loan, a revolving line of credit enables you to borrow money, pay it back, borrow more and so on for the agreed duration of the term. Once you’ve repaid whatever you’ve used, you can withdraw more, hence the term ‘revolving’. Your lender will inform you what your credit limit is, and you can have the freedom to decide how much to borrow and repay each month.

Benefits of revolving lines of credit

  • Shorter term borrowing than business loans
  • Don’t need a new agreement every time you make a withdrawal
  • Won’t pay anything until you actually start using the facility
  • Quick to arrange and can draw down immediately
  • Can work out cheaper in real terms than a fixed loan because you aren’t given a lump sump that immediately gathers interest