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LSDefine
Simple English definitions for legal terms
Revolving credit facility
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A quick definition of Revolving credit facility:
A revolving credit facility is like a piggy bank that you can keep taking money out of and putting money back into. You have to pay back what you borrow, plus some extra for interest and fees, but then you can borrow more again. It doesn't have an end date, as long as you keep being responsible with your borrowing.
A more thorough explanation:
A revolving credit facility is a type of loan that allows the borrower to borrow money on an ongoing basis. The borrower can repay the loan in regular payments, and each payment replenishes the amount available to borrow. This type of loan has no expiration date and can continue as long as the borrower has good credit.
Let's say a business has a revolving credit facility of $50,000. They borrow $10,000 and repay it over six months. During that time, they can borrow up to $50,000 again. If they borrow another $5,000, they will have $45,000 left to borrow. As they continue to make payments, the amount available to borrow will increase.
Another example is a credit card. A credit card is a type of revolving credit facility. The borrower can use the card to make purchases and repay the balance over time. As they make payments, the amount available to borrow increases.
These examples illustrate how a revolving credit facility works. The borrower can borrow money as needed and repay it over time, with the amount available to borrow replenishing with each payment.