Revolving Credit Finance Facility (RCF) Introduction & Benefits (2024)

FAQs

Revolving Credit Finance Facility (RCF) Introduction & Benefits? ›

It's a flexible form of funding that gives you access to a pre-approved line of credit, which you are able to use and repay on a recurring basis. Revolving credit facilities are similar to business credit cards, except that you don't use a card and instead the money is extended to you.

Revolving Credit Facility or RCF – A revolving credit facility is a type of credit that does not have a fixed number of payments, in contrast to fixed term loans. An example of this for members of the public is the credit card.

Firstly, it allows the borrower the ability to draw down funds, repay, and then withdraw again, hence the term 'revolving'. Secondly, the facility can be accessed at relatively short notice, of usually two to three days.

With revolving credit, you only pay interest for the money you use. You'll only be charged for the days you withdraw funding rather than for the total amount of credit, such as you'd find with term loans.

A revolving credit facility is a line of credit that is arranged between a bank and a business. It comes with an established maximum amount, and the business can access the funds at any time when needed.

Whatever you refer to it as, an RCF is essentially a direct line of credit that gives a borrower complete flexibility to draw upon capital, repay it back, and then draw down again continuously until the end of the agreed term and maximum credit limit.

Total debt for Rashtriya Chemicals and Fertilizers FY 2015-2020. In the financial year 2020, Rashtriya Chemicals and Fertilizers Limited (RCF) had a total debt of around 48.3 billion Indian rupees. The outstanding value comprised of the principal amount and the interest that was accrued over the specified time.

Term loans provide a one-time lump sum loan with a fixed repayment schedule. In contrast, revolving credit offers continuous access to funds up to an agreed limit, with flexibility in borrowing, repaying and re-borrowing.

The RCF is used to support a business's short term cash fluctuations such as seasonality of operating working capital (OWC). A revolving credit facility is also known as a revolver.

Unlike an overdraft, a revolving credit facility isn't linked to your bank account and resembles a new credit agreement. You'll agree to a set term, such as three years. Once the time is up, you might be able to extend it or take out a new one with the same lender.

What are 3 types of revolving credit? ›

Common examples of revolving credit include credit cards, home equity lines of credit (HELOCs), and personal and business lines of credit.

Cons of revolving credit

Higher interest rates: Revolving credit accounts typically come with higher interest rates than loans. Interest can become very problematic if you don't pay your account in full every month. Fees: Some revolving credit accounts require you to pay annual fees, origination fees, or other fees.

Revolving credit or revolving accounts function by giving you the choice to withdraw funds multiple times until you reach a set limit (or your credit limit). You decide how much money you borrow and how much your repayments will be, beyond the minimum payment requirements.

Further funds can be drawn down at any time with interest periods running in parallel. As with term loans, the borrower must give the lender a drawdown notice and the borrower must specify its chosen interest period. Interest periods are usually 3 or 6 months long.

With a revolving line of credit, you have an available credit limit. This lets you borrow what you need, when you need it, and pay interest only on the amount you borrow, not the total credit limit amount.

Revolving accounts are continuous, meaning they'll appear on your credit reports as long as the account remains open. Your payment history can also affect your credit scores. However, there's another important factor to consider when it comes to revolving credit: your credit utilization ratio.

The security required depends on the lender. Some RCFs can be secured against the debtor book. Some simply require a personal guarantee with no charge over the business.

A term loan involves borrowing a fixed amount of money, repaying this sum with interest over a specified term. Conversely, a revolving credit facility operates similarly to a credit card. This affords businesses a credit limit that they can borrow against, repay and borrow again.

Relative centrifugal field (RCF) describes and compares the strength of the fields generated by different size rotors and different operating speeds. Just as length is measured in units of inches or millimeters, time in units of hours or minutes, the relative centrifugal field is measured in units also.