Apply for a revolving credit facility

If approved by a lender, you’ll be extended a line of credit which will either be deposited into your account or offered to you as a transfer facility or cheque. You then use the funds, repay the money including any possible interest, and borrow again when you’re ready to. You are charged interest on the amount you borrow, rather than the amount of credit extended to you.

• Risk of falling into arrears: Missing a payment and falling into arrears can have a serious consequence on you and your business. Consider carefully how much credit you’d like to leverage and be careful not to overexert your business.

• Variable interest: Revolving credit facilities often come with variable interest rates. While interest rates can go down, they can also go up.

• Fees and penalties: Revolving credit facilities can come with fees. Be sure to read what you’re expected to pay in advance. Missed payments can also carry additional penalties.

• Interest rates: Due to the short term nature of revolving credit facilities you may be charged higher interest rates than if you were taking out a more traditional fixed term loan.

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Whether you use our service or search for suitable lenders using another method, it’s important to find out what’s available to you and compare features. For example, one lender may offer a lower interest rate, but also a reduced line of credit, whereas another may offer more credit, but they might request a personal guarantee. Consider all the available options before making an informed decision.

Once you’ve found a suitable lender, gather together all your documents (a business plan, cash flow projections, and company information) and submit a formal application. Then, it’s just a case of waiting to hear the decision.

Don’t forget, your current financial provider may already offer this service, so it’s worth checking in with them to find out if they can extend a favourable solution to you.

Whether you need to provide a personal guarantee for a revolving credit facility in the UK depends on your lender’s criteria and your business’s financial profile. Lenders are more likely to require personal guarantees when:

• You’re a Startup or Have Limited Trading History If your company lacks a strong track record, lenders often look for additional assurance that debts will be repaid.

• You’re Applying for Unsecured Credit Without collateral (like property or equipment), lenders may request a personal guarantee to mitigate their risk.

• Your Business Has Low or Uncertain Cash Flow If your revenue streams are unstable, a personal guarantee can help reassure a lender that they’ll recoup any borrowed amount.

That said, if your business is well-established, has a solid credit history, and can provide collateral, you may be able to negotiate a facility without a personal guarantee. Ultimately, it comes down to the lender’s risk assessment of your particular circumstances.

Revolving credit facilities in the UK can be either secured or unsecured, depending on the lender’s requirements and your business’s credit profile. A secured facility is backed by collateral, such as property, equipment, or other assets. This collateral can increase your borrowing limit and potentially lower your interest rate, but puts the pledged assets at risk if you fail to make repayments. Unsecured revolving credit facilities typically have higher interest rates and may require a stronger credit history or personal guarantee since there is no collateral to back the loan. Ultimately, whether you qualify for a secured or unsecured facility depends on your company’s financial health, the nature of your assets, and the lender’s risk appetite.

Revolving credit facilities are different from credit cards as the funds are usually deposited into your account or you’re provided with some other form of non-card access to the funds. This makes going over your credit limit a little different. Usually, you can only exceed your limit if you’ve been provided with a soft limit. In this case, while the exact consequences of going over your limit will vary from lender to lender, you may be charged higher fees, see a negative impact on your credit score or that of your business, and you might see increased interest rates. Keep communication with your lender open so you’re as informed as possible.

With a term loan, credit is extended to you along with a payment schedule. You return the funds along with payment for any interest or fees and the loan is considered complete. On the other hand, with revolving credit facilities, the lender sets an overall limit and it’s up to you how much and how often you withdraw funds.

A revolving credit facility and a term loan both provide business financing, but they serve different purposes.

Yes, it is possible to get a revolving credit facility with bad credit in the UK, but it can be more challenging. Traditional banks usually have stricter lending criteria and may reject applicants with lower credit scores or limited trading history. However, there are alternative and specialist lenders who cater to businesses or individuals with subpar credit by offering higher interest rates or requiring additional security.

Here are key considerations:

• Stricter Terms and Higher Costs With bad credit, you may face higher interest rates, lower credit limits, or additional fees. Lenders might also require more frequent or stringent repayment terms to reduce their risk.

• Collateral or Security Providing collateral—such as property, equipment, or other business assets—can help offset bad credit. By offering security, you may qualify for better terms or a larger credit limit.

• Personal Guarantees If your credit score is low, lenders often ask for a personal guarantee. This means you agree to repay the facility from personal funds if the business can’t meet its obligations, which increases your personal financial risk.

• Specialist and Alternative Lenders Beyond mainstream banks, alternative lenders and online platforms specifically focus on businesses or individuals with less-than-perfect credit. They may be more flexible with approval criteria, although costs can be higher.

• Improving Your Credit Regularly meeting repayments on any credit facility—whether revolving or otherwise—can gradually improve your credit score. As your score improves, you can potentially refinance at a lower rate or transition to a facility with more favourable terms.

Before proceeding, compare multiple lenders, read all terms carefully, and weigh the total costs against the benefits to decide if a revolving credit facility is the right choice for your situation.

A revolving credit facility can affect your credit score in several ways. Most lenders will perform a credit check—often a hard credit inquiry—when you first apply, which can cause a slight, temporary dip in your score. Once approved, your ongoing usage and repayment habits become key factors. If you consistently stay within your credit limit, make repayments on time, and avoid maxing out the facility, your repayment track record can help improve your credit rating. However, missing payments, regularly carrying high balances close to your limit, or defaulting on the facility can hurt your score. It’s also worth noting that if you’re a limited company director using a facility in the business’s name, your personal credit score may still be affected if you provided a personal guarantee.

No, a business overdraft and a revolving credit facility (RCF) are not exactly the same, although both provide flexible access to funds. A business overdraft is typically tied to your business current account, so you can spend more than you have (up to an agreed limit) and pay interest only on the overdrawn amount, usually calculated daily. An RCF functions as a standalone credit line that you draw down as needed, with interest charged only on the borrowed sum. Overdrafts can be easier to set up if you already have a business account, while RCFs often involve more paperwork, due diligence, and potentially collateral or personal guarantees. Overdrafts are ideal for everyday cash flow dips, whereas an RCF can be more suitable for planned expenses or larger, periodic financing needs.

Yes, you can use a revolving credit facility (RCF) to fund a startup in the UK, but there are important considerations. First, most lenders prefer businesses with an operating history and proven revenue, so pure startups might find it harder to qualify or may face higher interest rates and smaller limits. You may need a robust business plan and financial forecasts, and personal guarantees could be required.

RCFs typically have variable interest rates, along with fees such as arrangement, annual renewal, and non-utilisation fees. Although this type of facility is flexible—allowing you to draw funds as needed and pay interest only on what you use—it often suits short-term or working capital needs. If you have more substantial, long-term funding requirements, a term loan, equity financing, or a government-supported startup loan might be more cost-effective.

Some revolving credit facilities are secured against assets, which can increase your borrowing limit but put your assets at risk if repayments aren’t met. Others are unsecured, but require a stronger credit profile and can come with higher interest rates. On-time repayments will help build your business’s credit history, but as a new entrepreneur, you may be asked to sign personal guarantees. Before committing, weigh your options against alternatives such as equity financing, invoice financing, or peer-to-peer lending.

Yes, you generally can use a revolving credit facility to pay your taxes in the UK. A revolving credit facility provides a set credit limit you can draw upon as needed, and there are no direct restrictions that specifically prohibit using those funds for tax bills. However, you’ll want to consider the following points before doing so:

• Lender Terms & Conditions: always review your loan agreement to confirm that there are no limitations on how the funds can be used. Most facilities allow flexible use of funds, but it’s best to verify.

• Interest & Fees: revolving credit facilities often come with variable interest rates and fees that can add up if you don’t repay promptly. Compare the cost of using a revolving credit facility versus alternatives (like a short-term business loan or government payment plan).

• Tax Payment Deadlines: make sure you have enough time to draw down on your credit line and transfer the funds before any HMRC deadlines. Late tax payments can result in penalties and additional interest charges.

• Alternative Options (Time to Pay Arrangements): HMRC sometimes offers “Time to Pay” arrangements for businesses or individuals struggling to meet a tax deadline. It’s often worth contacting HMRC directly to see if you can set up a payment plan before resorting to external credit.

• Long-Term Financial Impact: continuously relying on a revolving facility to cover tax bills can create an ongoing cycle of debt. If this becomes frequent, it may be a sign you need to reassess cash flow, budgeting, or speak with a financial advisor.