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Revolving credit agreements allow borrowers to have flexible access to funds; however, they are subjected to interest rates that must be paid to the lender. Revolving credit agreements will often include information like the total amount of funds available, a set interest rate, and a payment due date.
A term loan involves borrowing a fixed amount of money, repaying this sum with interest over a specified term. Conversely, a revolving credit facility operates similarly to a credit card, affording businesses a credit limit that they can borrow against, repay and borrow again.
Revolving credit is a line of credit that remains available over time, even if you pay the full balance. Credit cards are a common source of revolving credit, as are personal lines of credit.
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Revolving credit facilities are a type of committed credit facility which allow the borrower to borrow on an ongoing basis while repaying the balance in regular payments.
Revolving credit allows borrowers to spend the borrowed money up to a predetermined credit limit, repay it, and spend it again. With installment credit, the borrower receives a lump sum of money that they must repay, in installments, by a specified date.