Revolving Credit Facility (RCF)

A revolving credit facility (RCF) is a flexible lending arrangement that allows a business to draw down funds up to an agreed limit, repay them, and draw down again - multiple times during the facility term. Interest is charged only on the amount drawn at any time, making it more efficient than a term loan when cash requirements are variable.

RCFs are commonly used for working capital management, seasonal funding, and short-term liquidity needs. They are different from term loans in that repayment is not structured - the borrower can repay and redraw freely. The facility limit is typically reviewed annually.

Commitment fees are often charged on the undrawn portion of an RCF (e.g. 0.5-1% per annum of the unused limit) to compensate the lender for holding the facility open. Unlike an overdraft (which can be recalled on demand), a committed RCF provides greater certainty of access.

Related terms