Revolving Loan Facility Explained: How Does It Work?
Navigating cash flow challenges is part of every founder's journey, but with a revolving credit facility, you gain the flexibility to adapt without sacrificing control. This smart, non-dilutive funding option ensures you always have access to the capital you need to keep your business thriving.
What is a revolving credit facility?
A revolving credit facility is a flexible line of credit that allows businesses to borrow, repay, and borrow again up to a pre-approved limit. Think of it as a financial safety net, offering access to funds when you need them without the need for repeated applications. This type of facility is often used by e-commerce businesses to smooth out cash flow fluctuations, especially during busy seasons, ensuring you have the liquidity to cover unexpected expenses or capitalised on growth opportunities.
How does a revolving credit facility work?
With a revolving credit facility, you only borrow what you need, when you need it. Once you repay the borrowed amount, the credit becomes available again, much like a credit card for your business. Interest is typically charged on the amount you use, not the total credit limit. So, if you’ve been approved for £200,000 but only draw £50,000, you’ll only pay interest on that £50,000 until it’s repaid. Once you repay, the full £200,000 becomes available again, providing ongoing flexibility.
The benefits of using a revolving credit facility
- Flexibility at its best: A revolving credit facility gives you access to funds whenever you need them, whether you’re dealing with cash flow gaps or want to seize unexpected opportunities.
- Interest efficiency: You only pay interest on the money you actually borrow, meaning you’re not stuck with hefty charges for unused credit.
- Ongoing availability: Once you’ve repaid what you’ve borrowed, you can dip into the facility again, offering continuous financial support for your business.
- Helps with planning: It’s great for businesses that need to manage seasonal or irregular cash flows—like when you need to stock up for the holidays or manage supplier payments.
A few drawbacks and risks to be aware of
Like with any financial product, a revolving credit facility isn’t without its downsides:
- Potential for overspending: The flexibility can sometimes tempt businesses to borrow more than they actually need, which could lead to higher debt and interest payments.
- Variable interest rates: Some facilities come with variable rates, meaning your repayment amounts could fluctuate depending on the market.
- Fees: Some lenders may charge fees for setting up or maintaining the facility, so it’s important to read the fine print before diving in.
How to apply for a revolving credit facility?
Applying for a revolving credit facility at Juice is straightforward and tailored to suit your unique business needs. At Juice, we offer non-dilutive funding that empowers ambitious e-commerce founders like you. Our process is transparent, quick, and designed to get you the funding you need—without the hassle. With flexible lines of credit ranging from £100K to £4M, we make sure you’re always ready to take your business to the next level.
Tips for managing your revolving credit facility
- Only borrow what you need: Be mindful of how much you draw from the facility. The more you borrow, the more interest you’ll pay, so keep your usage aligned with your business needs.
- Plan your repayments: Try to repay what you borrow as quickly as possible to reduce interest costs. Always have a plan in place to avoid overspending.
- Keep track of your borrowing: Regularly monitor your credit usage and interest payments to avoid any surprises down the road.
Apply for a revolving credit facility with Juice
At Juice, we understand that your business's needs are always evolving, and that’s why our revolving credit facility is built with flexibility and growth in mind. Whether you’re managing cash flow or looking to scale, Juice is here to support you every step of the way.
Ready to learn more? Apply for your revolving credit facility with Juice today and unlock the potential to grow your business on your terms. Get in touch with us now!