Quick answer
Revolving credit is a facility with a set limit that a business can draw on, repay and draw on again as often as it likes, without applying for a new loan each time. Interest is charged only on the amount used. Business overdrafts, lines of credit and credit cards are the common Australian forms. It suits uneven cash flow, not long-term purchases, and lenders review the limit regularly.
Key points
- A limit you can use, repay and reuse, rather than a lump sum repaid on a schedule
- Interest runs only on the balance drawn, though line fees may apply to the full limit
- Overdrafts, lines of credit, business credit cards and some invoice finance facilities all revolve
- Facilities are reviewed periodically, and the lender can reduce or cancel the limit
Most loans are a straight line: money arrives, then it’s repaid until the balance hits zero and the account closes. Revolving credit is a loop. The business gets a limit, uses what it needs, clears the balance as receipts land, and the headroom refills ready for next time.
That loop is why it’s the tool of choice for timing problems: wages due before customers pay, stock bought months before it sells, a tax bill landing in a quiet week.
Which facilities count as revolving credit?
| Facility | How it revolves | Typical security |
|---|---|---|
| Business overdraft | Your transaction account can go below zero, up to the limit | Often property or a GSA with banks |
| Business line of credit | A separate account you draw from and repay into | Unsecured for smaller limits, secured for larger |
| Business credit card | Spend, repay the statement, spend again | Usually unsecured |
| Invoice finance | Funding grows and shrinks with your unpaid invoices | Your debtor book |
Banks offer the cheapest overdrafts and secured lines to businesses that meet their criteria, and if your bank offers you one, it’s well worth taking seriously. Where a bank won’t extend or increase a limit, non-bank lenders provide unsecured lines of credit, usually with quicker approval and a higher cost. Our page on being refused a business overdraft increase covers the alternatives.
What does revolving credit cost?
There are usually two layers:
- Interest on what you use, calculated on the daily balance drawn.
- Fees on what you have access to, such as a line fee or facility fee on the full limit, plus establishment and sometimes monthly account fees.
So a $100k limit you barely touch still costs something each year. The flip side is that a facility used well, drawn for a few weeks and then cleared, can be far cheaper in dollars than taking a lump-sum loan you don’t fully need.
Want to see which kind of facility fits your cash cycle? Talk to us about a credit line.
Example: a year on a $80k line of credit
An illustrative Hobart events hire company does the bulk of its trade from spring through to early autumn. It holds an $80,000 line of credit.
| Month | What happens | Balance drawn | Available |
|---|---|---|---|
| July | Draws to cover winter wages and marquee repairs | $35,000 | $45,000 |
| September | Draws for new staging before the season | $70,000 | $10,000 |
| December | Wedding and festival income repays most of it | $15,000 | $65,000 |
| March | Fully repaid from the season’s takings | $0 | $80,000 |
Interest accrued only while money was out, mainly through late winter and spring. The owner never had to apply for a new loan mid-year, and the full limit was back in place before the next quiet period. The risk to watch: if the balance never returns to zero season after season, the line has quietly become long-term debt and a term loan may be cheaper. The cash flow gap calculator helps size a sensible limit.
Related terms
- Credit limit: the maximum you can draw at any time
- Overdraft: the bank account version of revolving credit
- Line fee: the charge on the limit itself
- Drawdown: taking money out of the facility
Looking for a buffer you can reuse?
A revolving facility is at its best when it’s set up before the pinch arrives, not in the middle of it. Starting the conversation with us takes roughly sixty seconds on a brief form, and there’s no check run on your credit to make an enquiry. Your file stays here rather than travelling to lender after lender. Someone on our team reads it, considers how your income rises and falls, and calls you. Be accurate about your turnover and your busy and quiet months, so the limit we suggest is one you’ll use well.
Frequently asked questions
What is the difference between revolving credit and a term loan?
A term loan advances a fixed amount once, and you repay it on a schedule over a set term. Revolving credit gives you a limit to dip into as needed, and money you repay becomes available again. Term loans suit one-off purchases; revolving credit suits recurring gaps.
Do I pay interest on the whole limit?
Interest is charged on the balance you actually use. Many lenders also charge a line fee or facility fee calculated on the full limit, whether you draw on it or not, so an unused facility still has a cost.
Is revolving credit secured or unsecured?
Both exist. Unsecured lines of credit are common for smaller limits. Larger limits are usually secured by property or a general security agreement. Secured facilities generally cost less and allow higher limits.
Can the lender cancel a revolving facility?
Most facilities have a review date, and the agreement sets out when the lender can reduce or cancel the limit. If trading weakens or covenants are breached, the lender may lower the limit at review. Read the review and termination terms before relying on the facility.
Does a large unused limit affect future borrowing?
It can. Other lenders may treat the full limit as potential debt when assessing serviceability, because you could draw it at any time. Reducing a limit you don't need can help a later application.