Revolving credit facility
A revolving credit facility (RCF) is a pre-agreed borrowing limit a UK business can draw from, repay and draw from again, paying interest only on the funds actually drawn, for the days they are drawn. It behaves like an overdraft but sits with a specialist lender rather than your bank, so limits are typically larger and easier to agree. Pricing is usually a monthly rate on the drawn balance. Best for lumpy, recurring working-capital needs such as stock cycles, VAT quarters and payroll timing gaps.
Founder & Managing Director, Muswell Rose, FundBiz
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind FundBiz. His background runs through commercial finance, mortgages and fintech, including as managing director of an invoice finance business. He oversees FundBiz's specialty finance comparison and the logic behind how businesses are matched to lenders.
Last reviewed: 14 July 2026
At a glance
- What it is
- Draw, repay, redraw against a set limit
- You pay interest on
- Drawn balance only
- Pricing style
- Monthly rate on drawn funds
- Watch for
- Facility and non-utilisation fees
- Personal guarantee
- Usually required
- Scope
- Ltd companies, LLPs, partnerships of 4+
How a revolving credit facility works
The lender agrees a limit, say £75,000, based on your turnover, bank statements and credit profile. The facility then sits available. When a cash need arrives, you draw what you need, and interest accrues on that drawn amount from the day you take it. Repay it and the full limit becomes available again, which is the "revolving" part. There is no fixed repayment schedule for the facility as a whole, although each draw usually has a maximum term, and the lender reviews the limit periodically.
The practical effect: you hold access to working capital without paying for money you are not using. That makes an RCF a standing tool rather than a one-off transaction, which is the core difference from a term loan.
RCF vs overdraft, credit card, term loan and invoice finance
| Product | How you borrow | What you pay for | Where it fits |
|---|---|---|---|
| Revolving credit facility | Draw and redraw against a set limit | Interest on the drawn balance, plus any facility fee | Recurring, lumpy working-capital needs |
| Bank overdraft | Go below zero on your current account | Interest on the overdrawn balance | Small day-to-day buffers with your own bank |
| Business credit card | Spend on the card up to a limit | Interest on balances not cleared monthly | Staff spending, subscriptions, short cycles |
| Term loan | One lump sum, fixed repayments | Interest on the full amount for the full term | A defined one-off investment |
| Invoice finance | Advance against unpaid invoices | Discount or service fee per invoice funded | B2B firms waiting on 30 to 90 day payment terms |
Source: FundBiz product structure overview
View as plain-text Markdown
### How a revolving credit facility compares with the products it is most often confused with | Product | How you borrow | What you pay for | Where it fits | | --- | --- | --- | --- | | Revolving credit facility | Draw and redraw against a set limit | Interest on the drawn balance, plus any facility fee | Recurring, lumpy working-capital needs | | Bank overdraft | Go below zero on your current account | Interest on the overdrawn balance | Small day-to-day buffers with your own bank | | Business credit card | Spend on the card up to a limit | Interest on balances not cleared monthly | Staff spending, subscriptions, short cycles | | Term loan | One lump sum, fixed repayments | Interest on the full amount for the full term | A defined one-off investment | | Invoice finance | Advance against unpaid invoices | Discount or service fee per invoice funded | B2B firms waiting on 30 to 90 day payment terms | Source: FundBiz product structure overview
The overdraft comparison matters most. A bank overdraft is attached to your current account and typically repayable on demand, and meaningful limits are hard to agree. An RCF is a standalone facility from a specialist lender with a limit sized to your trading, not your bank relationship. A business credit card covers spending; an RCF covers cash. If the underlying problem is customers paying slowly, funding the invoices directly through our sister site MarketInvoice is usually the better-shaped tool.
What it costs: the published reference points
UK flexible-credit pricing is quoted as a monthly rate on drawn funds rather than a single market APR, and it moves widely with the strength of the business. Two live published anchors, both checked in July 2026:
- iwoca Flexi-Loan. iwoca's own calculator showed 3.33% interest per 30 days, stated as a 49% APR representative, on facilities up to £1,000,000 for up to 60 months, as published at July 2026 on iwoca.co.uk. iwoca notes that at least 51% of customers borrowing £25,000 or less receive the representative APR or lower.
- Term-loan comparison. Funding Circle advertised fixed-rate business term loans from 6.9% per year on £10,000 to £750,000, as published at July 2026 on fundingcircle.com. A strong business borrowing one lump sum for a defined purpose will usually pay less on a term loan than on revolving credit.
The gap between those two numbers is the price of flexibility. You pay a higher rate on an RCF, but only on what you draw and only while you hold it, so short draws can still cost less in pounds than a cheaper loan you carry all year.
Worked example, honest arithmetic
Suppose a wholesaler agrees a £75,000 facility and draws £30,000 to land a stock order, repaying it 60 days later when the stock sells through. At a rate of 3.33% per 30 days on the drawn balance (the iwoca published calculator rate above), the interest is roughly:
- £30,000 × 3.33% = £999 per 30 days.
- Two 30-day periods = about £1,998 in interest, before any facility fee.
The remaining £45,000 of the limit cost nothing to hold, assuming no non-utilisation fee. Compare that with borrowing £30,000 on a 12-month term loan you did not need for 10 of those months. The annualised rate on the RCF is much higher, but the pounds paid for a short, genuine need can be lower. That trade is the whole product. Always convert quotes to a comparable annual cost before signing; our factor-rate and monthly-rate converter does the arithmetic.
When an RCF beats an MCA or a term loan
- Against an MCA: a merchant cash advance is a lump sum with a fixed total repayment set by a factor rate, so early repayment rarely saves money, and it suits card-led businesses. An RCF charges for time actually borrowed and does not care how your revenue arrives. If you would only draw occasionally, the RCF usually wins; if you need one lump sum and your income is card takings with a thin credit file, the MCA may be the one that approves.
- Against a term loan: a term loan is cheaper per pound per year. If the need is one-off and long, take the loan. If the need repeats, is short-lived or is unpredictable in timing, the RCF wins because you stop paying the moment you repay.
Eligibility
FundBiz arranges revolving credit facilities for UK limited companies, LLPs and partnerships of 4 or more partners only. Sole traders are outside our scope. Lenders will typically want several months of trading history evidenced by business bank statements or open banking, and most ask a director for a personal guarantee. Adverse credit narrows the panel but does not close it; see bad credit business loans for how lenders weigh it.
Related finance
Comparing the moving parts? See short term business loans for fixed 3 to 18 month lump sums, fast business loans if the constraint is how quickly money lands, cash flow loans for matching the borrowing to the timing gap it funds, limited company loans for the full company borrowing picture, and current business loan interest rates for what facilities cost right now.
Frequently asked questions
What is a revolving credit facility?
A revolving credit facility (RCF) is a pre-agreed borrowing limit a business can draw from, repay and draw from again, paying interest only on the amount actually drawn. It works like a business overdraft but sits with a specialist lender rather than your bank, and the limit is usually reviewed annually rather than repayable on demand in daily practice.
Is a revolving credit facility the same as an overdraft?
They behave similarly day to day, but they are not the same product. An overdraft is attached to your business current account with your bank, is typically repayable on demand, and limits above a modest level are hard to agree. An RCF is a standalone facility from a specialist lender, is usually larger, and is agreed for a fixed review period. Many businesses hold both.
Do I pay interest on the undrawn part of the facility?
Interest is charged on drawn funds only. Some lenders also charge a commitment or non-utilisation fee on the undrawn limit, or an annual facility fee, so check the fee schedule as well as the headline rate. A facility with no non-utilisation fee costs nothing to hold when you are not using it.
How much does a revolving credit facility cost in the UK?
Pricing is usually a monthly interest rate on the drawn balance rather than an annual APR. As a live published reference point, the iwoca Flexi-Loan calculator showed 3.33% interest per 30 days, which iwoca states as a 49% APR representative, as published at July 2026. Rates vary widely with the strength of the business, so treat any single figure as a reference point, not a promise.
When does an RCF beat a merchant cash advance?
When your income does not arrive mainly through a card machine, when you want to pay only for the days you actually borrow, and when you may need to draw more than once. An MCA is a single lump sum with a fixed total repayment set by the factor rate, so repaying early rarely reduces the cost. With an RCF, repaying early usually does.
Who can apply for a revolving credit facility through FundBiz?
UK limited companies, LLPs and partnerships of 4 or more partners. Sole traders are outside our scope. Lenders typically want to see several months of trading evidenced by business bank statements, and a director personal guarantee is commonly required. Checking eligibility uses a soft search with no credit-file footprint.
See what facility limit your business could agree
Open the eligibility checker →Soft search, no credit-file footprint. Limited companies, LLPs and partnerships of 4+ only.
Last reviewed: 14 July 2026. Published lender figures checked live at the sources named above on 14 July 2026; rates change, always confirm on the lender's own page.