A revolving credit facility gives you access to funds you can draw down and repay as often as you need, paying interest only on what you use.
If your business runs on uneven income, whether that's seasonal work, project-based contracts, or payment delays from clients, you've likely faced the same problem: expenses arrive before the money does. You might have invoices outstanding for 30 or 60 days while suppliers expect payment within a week. A revolving credit facility solves that timing problem without locking you into a fixed loan you don't always need.
How a revolving credit facility actually works
You're approved for a credit limit, and you draw funds whenever you need them. As you repay, that amount becomes available again without reapplying. Interest is charged daily on the outstanding balance, so if you draw $10,000 and repay it within two weeks, you only pay interest for those 14 days. Once repaid, the full limit is yours to use again.
Consider a contractor in Perth who secures a three-month project worth $80,000. Materials and labour need to be paid upfront, but the client pays in stages at 30, 60, and 90 days. A $40,000 revolving credit facility lets the contractor draw $25,000 for materials in week one, repay $15,000 when the first payment arrives, then draw again for the next phase. By project end, the facility has been used three times but the total interest paid is based only on the days funds were actually drawn.
When it makes more sense than a term loan
A term loan gives you a lump sum upfront with fixed repayments over a set period. That structure works when you know exactly how much you need and when you'll repay it, like purchasing equipment or vehicles. A revolving facility works when your funding needs fluctuate.
If you're covering irregular expenses like stock purchases that depend on demand, bridging gaps between invoices, or managing seasonal peaks, paying interest on a full loan amount when you only need half of it most months doesn't make financial sense. The flexibility to borrow and repay multiple times within the same facility means you're only paying for what you're using at any given moment. For businesses that need access to working capital without committing to a rigid repayment schedule, this is often the better fit.
What it costs and how approvals work
Interest rates on revolving credit facilities are typically higher than secured term loans because the lender is taking on more risk with flexible access. Rates vary depending on whether the facility is secured against an asset or unsecured, your business financials, and how long you've been operating. Expect to provide recent financial statements, evidence of consistent income, and in some cases, a director's guarantee.
Some lenders also charge an annual line fee or establishment fee, which can range from a few hundred dollars to over a thousand depending on the credit limit. Monthly account-keeping fees may also apply. It's worth comparing the total cost, not just the interest rate, when weighing up options. A facility with a slightly higher rate but no ongoing fees can sometimes work out cheaper over 12 months if you're using it sporadically.
Revolving credit compared to invoice financing
Both tools help manage cashflow gaps, but they work differently. Invoice financing lets you access a percentage of an outstanding invoice before your client pays, usually around 80% to 90%. The lender collects payment directly from your client, then releases the remaining balance minus fees. It's tied specifically to invoices, so if you don't have outstanding receivables, you can't access funds.
A revolving credit facility isn't tied to specific invoices. You can use it to pay suppliers, cover wages, purchase stock, or handle any operational expense. It gives you more control over when and how you access funds, and your clients aren't involved in the arrangement. For businesses that don't always have invoices to finance, or prefer to keep client relationships separate from funding arrangements, a revolving facility under cashflow solutions offers more versatility.
Seasonal cashflow and how it applies in WA
Businesses tied to agriculture, tourism, or construction in Western Australia often see income concentrated in specific months. A wheat farmer might receive the bulk of annual income after harvest, while expenses for fuel, maintenance, and labour are spread across the year. A revolving facility smooths that out, letting you draw funds during lean months and repay when income arrives.
In our experience, this structure works particularly well for agribusinesses that need to cover operational costs between planting and harvest, or for contractors who wait on progress payments. The ability to repay in full without penalty when income lands, then draw again when the next expense cycle starts, keeps interest costs low while maintaining access to funds year-round.
Using it alongside other finance
A revolving credit facility doesn't replace asset finance or term loans. It complements them. You might use equipment finance to purchase a new truck with fixed monthly repayments, while keeping a revolving facility available to manage day-to-day expenses or cover an unexpected repair. The two serve different purposes, and having both gives you options depending on what the expense is.
Some businesses in WA maintain a smaller revolving facility as a buffer, even if they don't use it every month. The cost of keeping it open is minimal compared to the risk of being caught short when a client delays payment or an urgent cost arises. Think of it as insurance for your cashflow rather than a primary funding source.
What happens if you can't repay on time
Most revolving facilities don't have a fixed repayment schedule, but they do require regular activity. If your balance sits at or near the limit for several months without meaningful repayment, the lender may review the arrangement or ask for a repayment plan. Some facilities include a provision that requires the balance to be cleared at least once within a 12-month period to prove the facility is being used as intended, not as permanent debt.
If you're struggling to repay, talk to your lender or broker before it becomes a formal issue. In many cases, they can restructure the facility, extend the term, or convert part of the balance to a term loan with fixed repayments. Ignoring it only limits your options later. We regularly see this handled well when businesses communicate early rather than waiting for the lender to step in.
Call one of our team or book an appointment at a time that works for you. We'll walk through your cashflow patterns, compare facility options across lenders, and help you set up a structure that fits how your business actually operates.
Frequently Asked Questions
What is a revolving credit facility and how does it work?
A revolving credit facility gives you access to funds up to a set limit that you can draw down and repay as often as needed. You only pay interest on the amount you've drawn, and once you repay, that amount becomes available again without reapplying.
When should I use a revolving credit facility instead of a term loan?
Use a revolving facility when your funding needs fluctuate, like covering irregular expenses or bridging gaps between invoices. A term loan suits one-off purchases like equipment where you need a fixed amount and know the repayment timeline.
How does a revolving credit facility compare to invoice financing?
Invoice financing is tied to specific outstanding invoices and involves the lender collecting payment from your client. A revolving credit facility isn't tied to invoices, giving you more flexibility to use funds for any business expense without involving your clients.
Can I use a revolving credit facility alongside other business finance?
Yes, many businesses use a revolving facility to manage day-to-day cashflow while keeping term loans or asset finance for larger purchases like equipment or vehicles. The two serve different purposes and work well together.
What happens if I can't repay my revolving credit facility balance?
If you're unable to repay, contact your lender early. They may be able to restructure the facility, extend the term, or convert part of the balance to a term loan with fixed repayments to make it more manageable.
