Revolving Credit Facility

A credit line that refreshes as the borrower repays, allowing repeated draws up to the approved limit. Revolvers provide flexible working capital and businesses only pay interest on the outstanding drawn amount.

Revolving vs installment, in one line: revolving credit (a revolver, a business line of credit, a business credit card) can be drawn, repaid, and drawn again; installment credit (a term loan, an SBA loan, an equipment loan) is borrowed once and paid off on a fixed schedule. When someone asks whether a small business loan is installment or revolving, the answer depends on the product: "loans" are almost always installment, "lines" and "cards" are revolving.

Where the term is used: "revolving credit facility" is the language of bank and asset-based lending, where the revolver is sized to a borrowing base (a percentage of eligible receivables and inventory) and re-tested monthly. Smaller businesses meet the same structure under the name business line of credit. Commitment fees on the undrawn portion, annual renewals, and financial covenants are standard on bank revolvers. See also: business line of credit, borrowing base, loan covenant.