how a revolving loan facility works
a revolving loan facility is typically a variable line of credit used by public and private businesses the line is variable because the interest rate on the credit line can fluctuate in other words if interest rates rise in the credit markets a bank might increase the rate on a variable rate loan the rate is often higher than rates charged on other loans and changes with the prime rate or another market indicator the financial institution typically charges a fee for extending the loan criteria for approval of the loan depends on the stage size and industry in which the business operates the financial institution typically examines the company s financial statements including the income statement statement of cash flows and balance sheet when deciding whether the business can repay a debt the odds of the loan getting approved increases if a company can demonstrate steady income strong cash reserves and a good credit score the balance on a revolving loan facility may move between zero and the maximum approved value 