Get access to capital whenever your business needs it. Revolving Credit Facility is one of the alternative flexible finance options that allows for on-demand money withdrawal and convenient repayment as and when needed.
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It is a rolling finance agreement that makes it possible for businesses to withdraw cash whenever required. Borrowers in this type of finance agreement engage in cyclic withdrawal and repayment of capital at agreed periods and interest rates with the lenders. RCF is more access-friendly than a similar financial option -overdraft facilities.
Revolving Credit Facility is more suited for the working class capital comprising the small and medium-sized businesses. SMEs can take advantage of RCF and use its funds to fulfill all sorts of legitimate business purposes -from payrolls to renovation/maintenance. Any cash needs of the business are well taken care of by availing of the Revolving Credit Facility.
A Revolving Credit Facility is a dynamic form of business loan. It is different from static business loans such as an overdraft or secured loans. The funding limit through RCF, repayment cycle terms and conditions are agreed upon between borrower and lender before undertaking Revolving Credit Facility.
One of the distinct features of RCF is its convenience of paying the interest on only the amount withdrawn from the total loan amount. The cycle is replenished and the withdrawal amount is set to default the agreed-upon loan amount once you make repayment on your corresponding withdrawals. Use Revolving Credit to pay back only on the amount of money used.
Here we enlist and discuss some striking features of the Revolving Credit facility which makes it one of the most popular alternative financing options among businesses.
In many cases, if you prove to be an ideal borrower, some lenders allow you to withdraw cash on the day of your application. RCF proves to be the faster finance instrument than most other finance options.
By availing of RCF, businesses can improve their cash flow management and use the immediately available cash at hand for all business operations. The fact that you can access finance whenever you want keeps the stress of the non-availability of cash at bay.
Lenders tend to increase the sanctioned amount and spending limit if the borrower promptly adheres to withdrawal and repayment conditions. This way trust is built with the lender which makes subsequent borrowing easier and faster.
Small and large businesses in the United Kingdom can apply for and get loan incentives via RCF. However, one of the key RCF qualifying requirements is that the borrower must be a UK-based company with active business operations principally in the UK itself.
Make sure that relevant documentation such as management accounts, business plans, historical accounts, and asset records are up to date and ready for any audit. Financial institutions/lenders may require businesses to undergo numerous security checks for standard credit and fraud, anti-money laundering, and KYC to determine eligibility and payback guarantee for the corresponding loan period.
Some lenders need you to furnish a personal guarantee if the applicant is seeking a loan amount under the RCF. If the borrower is unable to make repayments on specified periods, he/she shall be personally liable to repay the loan amount.
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The term typically is between 6 months and 2 years. If the borrower wants to renew the agreement, they shall be able to do so after 2 years at the direction of the lender.
Interest rates vary depending on the loan amount and various lenders. The interest rates under RCF are usually higher than other forms of traditional lending facilities.