Revolving Credit Financing
A revolving credit line allows a customer to a prespecified limit,repay all or a portion of the borrowing,and reborrow as necessary until the credit line matures.One of the most flexible of all business loans,revolving credit is often granted without specific collateral and may be short-term or cover a period as five years.This form of business financing is particularly popular when the customer is highly uncertain about the timing of future cash flows or about the magnitude of his or her future borrowing needs.Revolving credit helps even out fluctuations in the business cycle for a firm, allowing it to borrow extra cash when sales are down and to repay during boom periods when internally generated cash is more abundant. Lenders normally will charge a loan commitment fee either on the unused portion of the credit line or, sometimes, on the entire amount of revolving credit available for customer use.