Revolving Credit Facilities for UK Businesses: How They Work, Costs and Eligibility

A revolving credit facility suits a cash gap that closes and then reopens. You draw up to an agreed limit and pay interest on the balance you use; once you repay it, that amount becomes available again without another loan application.

A reusable limit is not necessarily a guaranteed one. Whether the lender must keep the money available depends on whether the facility is committed, while the UK bank pages we checked publish neither their pricing margins nor their charges on undrawn balances. You therefore need the agreement and the quote to establish what access you are buying and what the unused limit will cost.

Revolving Credit Facilities at a Glance

Start with certainty of access and the amount you expect to draw. A committed facility obliges the lender to keep the agreed money available while its conditions hold, but you may pay for the unused portion as well as for what you borrow. Our £100,000 model shows how sharply the first-year cost changes with the drawing pattern even when the assumed rates and fees stay the same.

What a Revolving Credit Facility Is

The limit replenishes as you repay it, so the same facility can cover several short borrowing periods. You do not submit a fresh loan application whenever the gap returns. That is the practical difference from arranging another term loan each time cash gets tight, although individual drawdowns may still be subject to conditions in the agreement.

Say you need £30,000 to cover Friday’s payroll because a large customer has slipped from day 30 to day 45. You draw the £30,000, repay when the money lands, and pay interest for the fortnight you actually borrowed. Take the same £30,000 as a one-year term loan and you pay interest on the full balance for twelve months, for a gap that lasted two weeks. That difference is the case for revolving credit, and it holds only while the borrowing stays short.

How long the facility runs

There is no standard term, whatever the brochures imply. Lloyds publishes a revolving credit facility from £25,000 with a minimum term of one year and a maximum of five. The British Business Bank describes reusable credit more generally as available for three months to two years, with the option to extend if you have made every repayment on time and still meet the lender’s criteria. We found no two providers publishing the same term, so anyone who tells you a revolving credit facility (RCF) runs for one to three years is describing a habit rather than a rule.

The date that matters is the review, not the length. At the end of the facility period the lender looks again and can renew, reprice or decline, and a decline lands as a demand for the balance. If your facility expires in March and your biggest stock order goes in every April, the renewal is the thing to get in the diary, months ahead of the invoice.

Committed vs Uncommitted Revolving Credit Facilities

A revolving credit facility is not committed by default. Committed describes whether the lender is contractually obliged to lend, and plenty of revolving facilities carry no such obligation. British Business Bank scheme documentation for the coronavirus lending schemes states plainly that it applies to committed and uncommitted revolving credit facilities, treating them as two different things that both revolve.

Repaid capacity and committed access are separate protections. The first determines whether money becomes available again after repayment; the second determines whether the lender must provide it on the agreed terms. We put commitment first when judging a facility because a reusable limit has little planning value if the lender can refuse the next drawdown.

An uncommitted facility is a favour the lender can stop doing.

Ask for the answer in writing, in roughly these words: is this facility committed for the full term, and on what grounds can you reduce or cancel it before the review date? A sales call will give you a limit and a rate quickly enough. The facility agreement is the only place the question above is actually answered, and an uncommitted line dressed up in the language of certainty is closer to an overdraft than to the product you think you are buying.

Why Businesses Use Them

Revolving credit works best when the same short cash gap keeps returning. If customers consistently pay four to six weeks after you invoice them, you can draw for that interval, clear the balance when payment arrives and reuse the limit next time instead of arranging another loan.

The situations are familiar: payroll the week before a large customer settles, a stock buy ahead of a seasonal peak, a VAT quarter where HMRC wants paying before your debtors do. In each case the money comes back within weeks, which is exactly the shape revolving pricing rewards.

Some businesses also hold a facility as a standby while a larger financing arrangement completes. That works, provided the balance clears before the term expires rather than quietly becoming permanent. The alternative is common enough to state plainly: a revolving balance that never moves is a term loan nobody priced as one.

Bank RCFs and Fintech Revolving Credit

Bank and fintech facilities differ most in how they are priced and repaid, and the shared name does not make the mechanics interchangeable.

At the bank end the facility is formal. Lloyds sets a £25,000 floor and a one to five year term, and stops there: no margin, no arrangement fee, no undrawn charge on the page. HSBC provides revolving lines through asset based lending, and we found no price or fee on that page. Expect underwriting on filed accounts, financial covenants, a debenture on anything substantial, and a price you only discover by asking.

At the fintech end, pricing is published and repayment is more prescribed. iwoca lends from £1,000 to £1m and charges from 1.5% per 30 days on what you have drawn. MultiFi runs £10,000 to £350,000 from 1.99% a month, with another draw available once your balance falls below two thirds of the limit. Funding Circle FlexiPay charges a flat fee from 1.99% per drawdown, with no interest, and collects repayment over one to twelve instalments.

We read the repayment mechanics on each provider page, and two of these are not pure revolvers. MultiFi repays capital in instalments after a 60-day interest-only period, so the balance winds down on a schedule rather than whenever your customer pays. FlexiPay prices each drawdown as its own instalment plan. Both revolve, in the sense that capacity comes back. Neither behaves like a bank line you can sit on and clear in one go. And the labels wander: flexible loan, flexi credit, reusable credit and business line of credit all turn up describing the same basic idea.

How the Cost Works

You are buying two things, and they are priced separately. One is the money you actually borrow. The other is the promise that the money will be there when you ask. Businesses shop hard for the first and sign for the second without pricing it, which is how a facility that looked competitive turns into a standing charge for fresh air.

Interest on the drawn balance

Interest is normally calculated daily on what you owe and collected monthly, so the cost tracks your borrowing rather than your limit. iwoca charges interest only for the days you hold the money and takes no fee for repaying early. MultiFi charges interest on the balance left after each capital repayment, so the charge falls as each instalment lands.

At the fintech end the rate is quoted per month, which is not a number you can compare with a bank margin until you annualise it. Compound a monthly rate over the 12.17 thirty-day periods in a year and 1.5% a month becomes 19.9% a year, while 3% a month becomes 43.3%. We checked that conversion against the lenders’ own published figures: iwoca’s worked example of 3.33% per 30 days carries a 49% representative APR, which is what the same arithmetic gives.

That conversion is worth doing before you sign anything. Tide’s marketplace page tells prospective borrowers that rates are typically between 1 and 3% per month, which reads mildly and means 19.9% to 43.3% a year. MultiFi publishes a 43.5% representative APR on its worked example. Those are the real numbers at this end of the market, and we could not find a single-figure percentage anywhere in the published material, whatever the guides to revolving credit keep repeating.

Bank pricing is quoted deal by deal, usually as a margin over a reference rate, so a variable facility moves when Bank Rate moves. The Bank of England held Bank Rate at 3.75% on 17 September 2026, with the next decision due on 5 November. Ask what your margin sits over as well as what it is, because the two together are your rate and only one of them is fixed by the conversation you are having.

Arrangement, renewal and legal fees

These are one-off charges, and on a facility you touch twice a year they can be most of what you pay. NatWest publishes the clearest bank scale of this shape on its business overdraft: £50 up to a £500 limit, £75 to £1,500, £100 to £5,000, then 1.5% with a £150 minimum, and its own representative example uses a £300 fee. No UK bank we checked publishes an equivalent scale for a revolving credit facility.

The fintech pages we checked largely dispense with setup charges. FlexiPay is free to set up if you apply direct, MultiFi charges no arrangement or platform fee, and iwoca takes nothing for early repayment, though it adds a fee for borrowing beyond a year: typically 5% at 13 to 24 months and 6% for longer. A bank debenture can add legal and security costs, but we found no published figure for them. Put an estimate in the quote, before those costs arrive in the completion statement.

Commitment and non-utilisation fees

This is the charge on the money you have not borrowed. The lender is holding capital ready for you and prices that separately from lending it, usually as a percentage a year on the undrawn balance. It goes by commitment fee or non-utilisation fee depending on the paperwork, and it is the line most owners read past.

None of the UK banks we checked publishes what it charges, and we found no dataset that would support a market-wide figure, so a percentage quoted online is not a price you can rely on. Require the quote to state the annual charge on the undrawn balance and whether it accrues daily or quarterly. Only then can you include the unused limit in the total cost and compare the facility fairly.

What UK providers actually publish

Fintech lenders publish more of the price, while the bank pages we read usually stop at limits and terms. Across the provider material checked, bank pricing remained quote-specific and fintech pricing followed published rules or representative examples. That difference means you can compare fintech costs before applying, but a bank facility remains largely unpriced until the lender has assessed the business.

Three evidence classes sit in that table and they are not interchangeable. A published price is a rule the lender applies. A representative APR is one worked example, and iwoca is explicit that it goes to at least 51% of customers borrowing £25,000 or less, so up to half of borrowers pay more than that. A quote-only product tells you nothing until you have applied. Comparing a bank facility with a fintech line on rate alone is comparing a number with a blank.

The Commitment Fee Trap

Arrange a large facility, barely touch it, and you can pay handsomely for the privilege. A £100,000 limit carrying a 1% charge on the undrawn balance costs £1,000 a year with the facility completely unused, and that is before the arrangement fee. If you need the line twice a year for modest amounts, the standing cost can swallow the interest saving that made revolving credit attractive in the first place.

The arithmetic, so you can run it on your own quote

Total first-year cost is the sum of four things: interest, calculated as the drawn balance multiplied by the annual rate multiplied by days drawn and divided by 365; the undrawn charge, calculated the same way on the balance you have not borrowed; the arrangement fee; and any renewal or legal costs. Divide that total by the cash you actually drew and you have the number that matters, which is what each pound of borrowing cost you.

Here is the first row of the table below, worked in full, so you can drop your own figures into the same slots. A business drawing £20,000 twice for 30 days each time has borrowed for 60 days: £20,000 multiplied by 10%, multiplied by 60 and divided by 365, is £329 of interest. The undrawn charge runs alongside it, 1% a year on £80,000 for those 60 days and on the full £100,000 for the remaining 305, which comes to £967 between them. Add the £1,500 arrangement fee and the first year costs £2,796 for £40,000 of borrowing, which is where the 7p per pound comes from.

The same £100,000 facility at three utilisation levels

The rate and the undrawn charge below are assumptions, not market averages, because no UK bank publishes either for this product. We have used 10% a year on the drawn balance, 1% a year on the undrawn balance and a £1,500 arrangement fee on a one-year facility, and we have shown the working so you can substitute your own. Put your own quote into the same three rows and the shape of the answer will not change.

Read the last two columns together, because that is where the decision lives. The business that barely draws spends 12% of its bill on borrowing and 88% on arranging and reserving, and pays 7p for every pound it eventually used. The business living at £90,000 pays mostly interest, and at that point it is holding a term loan at revolving prices and should go and price a term loan. On our numbers the middle row is the only one where the product does the job it is built for.

One provider publishes enough to run this without assuming anything. MultiFi sets out a £50,000 Flexi Credit facility over 12 months at 2.99% a month on the reducing balance, with no fees: £61,213 repayable in total, a 43.5% representative APR. That is £11,213 to borrow £50,000 for a year on a balance that falls as it is repaid, with no arrangement fee and no penalty for clearing it early.

The fix is dull and it works. Size the facility to what you draw, not to the worst month you can imagine. A £25,000 line used most months beats a £100,000 line used twice a year, and on the numbers above it is not close.

Compare revolving credit facilities

Revolving Facility vs Business Overdraft

The overdraft is the cheaper published product and the weaker promise. NatWest publishes a 5.25% representative EAR on its business overdraft with a £300 arrangement fee in its own example, and lets you apply online up to £50,000. None of the banks we checked publishes a revolving credit facility rate at all. We compared the two on the only figures either side puts in writing, and on those the overdraft wins on price.

The overdraft loses on certainty. NatWest publishes its business overdraft as a 12-month facility, while a committed revolving facility can run for years and obliges the lender to keep the money available while its conditions hold. In either case, the agreement tells you whether the limit can be withdrawn mid-term. Read the cancellation terms before treating an overdraft or revolving facility as dependable cash.

For an occasional buffer alongside a bank you already deal with, we choose the overdraft: it is the cheaper call on published prices and the faster one to arrange. Once you need headroom you can plan around, the question becomes what the lender has committed to in writing, and you pay for that commitment. Our revolving credit vs overdraft comparison works through the choice in more detail.

When a Term Loan Makes More Sense

Reach for a term loan when the need is a large one-off, or when the balance will stay drawn. Equipment, a fit-out, anything you will still be using in three years: the borrowing does not come back to you in weeks, so revolving pricing has nothing to reward.

The third row of the table above is the tell. A facility sitting at 90% for months is a term loan in disguise, priced as though the balance were temporary, and 82% of what you pay is interest on money that never went back. Businesses run like that for years without noticing, because each monthly charge looks reasonable on its own.

Compare the revolving facility’s interest margin, undrawn charge and arrangement fee with the term loan’s total cost over the same period. If the balance will remain drawn, the term loan is the more natural comparison because you are not benefiting from repeated repayment and redraw.

Revolving Credit Facility vs Business Line of Credit

These are not synonyms, though UK lenders use them as though they were. A business line of credit is the broad category: credit made available up to a limit, which you draw as you need it. A revolving credit facility is a specific structure inside that category, the one where repaid borrowing capacity becomes available to you again. Every RCF is a line of credit. Not every line of credit revolves.

The distinction earns its keep at the point of asking two questions. Does repaid capacity come back? And does it come back automatically, or only when the lender agrees? We put both questions to the published material, and MultiFi answers them on its own page: capacity returns, but a reload unlocks only once your balance falls below two thirds of the limit and an account check has run. That is a line of credit that revolves on conditions, and it is a perfectly reasonable product. It is just not the same as drawing freely up to your limit whenever you like.

If repaid capacity does not return, you have a non-revolving line rather than the structure described here. Our guide to business lines of credit compares both forms and explains the different terms UK lenders use for them.

Eligibility: What Lenders Look For

Your legal structure and your filed accounts decide which end of the market will talk to you, before anyone looks at your rate. The British Business Bank is blunt about the first: revolving credit is usually only available to limited companies, so sole traders may find it hard to access. Funding Circle says the same in fewer words by asking applicants to apply as a limited company.

The floor matters too. Lloyds starts at £25,000, so the bank route is closed to a business that wants £8,000 of headroom, while iwoca lends from £1,000. Across the seven providers we checked, a business with thin accounts and sound trading is a fintech customer rather than a bank one, and it pays for that in the rate.

What lenders assess

• Filed accounts and how long you have been trading, which is the first gate at any bank
• Bank statements, and what the balance does across a month rather than on the day you apply
• The borrowing pattern the facility implies, because a line that never clears reads as a term loan
• Existing debt, existing security, and whether anyone already holds a debenture
• Director credit history, which matters more the smaller the company

Security and personal guarantees

The British Business Bank makes two statements worth holding together: most lenders do not require security or assets with a revolving credit application, and you may need to give a personal guarantee. Those are not in tension. Security usually means a charge over company assets, while a guarantee is a promise from you personally, and a lender can ask for the second without the first.

None of the seven providers we checked publishes a blanket policy either way, so whether you are asked turns on the size of the facility and the strength of the company. Settle it before you compare rates. A guarantee puts your own house and savings behind the company’s borrowing, and on larger facilities a debenture puts the company’s assets there too. Read both documents before the rate sheet, because a covenant breach or a default can let the lender reprice or withdraw the facility and then call on what stands behind it.

Documents to have ready

• Two years of filed accounts where you have them, and management accounts for the current year
• Three to six months of business bank statements
• A cash-flow forecast that shows the gap the facility is meant to bridge and when it closes
• Details of existing borrowing, including anything secured
• Company details and director information, including addresses for the last three years

Are Revolving Credit Facilities Regulated?

An unregulated credit agreement does not automatically leave your business without access to the Financial Ombudsman. FCA regulation of the agreement and eligibility to complain are separate tests, so a limited company may fall outside the consumer credit regime while still having a free route to challenge the lender’s conduct.

Is the agreement FCA-regulated?

Usually not. The consumer credit regime covers agreements where the borrower is an individual, a category that takes in sole traders and smaller partnerships but not limited companies, so lending to a company falls outside it. Even for a sole trader the exemption starts early: under article 60C of the Regulated Activities Order, credit above £25,000 taken wholly or predominantly for the borrower’s business purposes is an exempt agreement.

The practical consequence is that your contract is your protection. There is no regulated cooling-off period to fall back on and no prescribed format for the paperwork, so the default terms, the fee schedule and the cancellation rights are the whole of your position. If you are borrowing as a sole trader or a small partnership, ask the lender directly whether the agreement is regulated, because the answer changes what you are owed.

Can you complain to the Financial Ombudsman?

In most cases, yes. The FCA Handbook puts lending money inside the Ombudsman’s compulsory jurisdiction at DISP 2.3, which does not turn on whether your particular agreement was regulated. We took that from the Handbook itself rather than from other guides, because this is the point the guides get wrong. What you do have to be is an eligible complainant, and DISP 2.7 defines that as a consumer, a micro-enterprise, a small business, a charity or a trust.

The size tests are published. The Financial Ombudsman Service counts a micro-enterprise as a business employing fewer than 10 people with turnover or a balance sheet no greater than €2 million, and a small business as one with turnover under £6.5 million that either has a balance sheet under £5 million or employs fewer than 50 people. On the Ombudsman’s own figures about 99% of UK small businesses and micro-enterprises can bring a complaint, and a director who has given a personal guarantee can complain about the lending they guaranteed.

Two limits are worth knowing before you rely on it. Small-business complaints only reach events on or after 1 April 2019, though micro-enterprises can go further back. And the Financial Services Compensation Scheme has nothing to do with any of this: it protects deposits, not borrowing, so it will not appear if a lending dispute goes wrong. The position to hold in your head is that your agreement is probably unregulated and you probably still have a free route to complain about how the lender behaves.

Is a Revolving Credit Facility Right for Your Business?

Take one if the same gap keeps reopening, you will draw in most months, and you can size the limit to what you genuinely use. That combination is where revolving pricing beats everything else available to a smaller company, and the payroll-before-payment case at the top of this page is the clearest version of it.

Leave it alone if you need the money once for something you will keep, if the balance will stay drawn, or if you mainly want a large standby you will rarely touch. A term loan is cheaper for the first two patterns because the borrowing is not revolving in practice. For the third, an undrawn charge makes reassurance expensive; a smaller limit or an overdraft will usually cost less.

If a lender will not reduce the limit to match your expected use, the unused portion becomes part of the price. You may be paying to reserve money the business has little realistic prospect of drawing.

Whichever way you go, get three answers in writing before you sign. Is the facility committed for the full term, and on what grounds can it be cancelled or reduced? What is charged on the undrawn balance? And what does the whole first year cost at the drawing pattern you actually expect, fees included? If none of those three can be answered in an email, the facility is not ready to sign.

Revolving Credit Facility FAQs