Glossary

Facility limit

What a facility limit is, how it's set on a revolving facility, and why the limit and the amount drawn are different things.

A facility limit is the maximum amount a borrower is approved to draw under a revolving facility such as a business line of credit or an invoice finance arrangement, distinct from the amount actually drawn at any point in time, which can sit well below the limit. Lenders set the facility limit based on serviceability, security and, on invoice finance, the value of eligible receivables, and typically review it periodically rather than fixing it permanently for the life of the facility. Borrowers are usually charged a line fee on the full facility limit regardless of how much is drawn, alongside interest only on the amount actually outstanding, which is why understanding the fee structure matters as much as the headline limit when comparing facilities. A facility limit can generally be increased on request, subject to a fresh review, as a business's trading and security position grows.

Related

Business lines of credit · Line fee · Drawdown

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