Revolving Credit Facility

A revolving credit facility (revolver) is a flexible lending arrangement between a business and a financial institution that allows the borrower to draw down, repay, and re-borrow funds up to a predetermined credit limit over a specified term — typically 3 to 5 years. Unlike term loans that disburse a lump sum, revolvers function like a corporate credit line: the borrower pays interest only on the outstanding drawn balance (commonly SOFR + 150–350 basis points for investment-grade borrowers), plus an unused commitment fee of 0.15–0.50% on the undrawn portion. Revolving credit facilities are the backbone of corporate liquidity management, providing working capital buffers for seasonal revenue fluctuations, bridge financing for acquisitions, and backstop funding for commercial paper programs. Banks typically require quarterly financial covenant compliance — including minimum interest coverage ratios (usually ≥ 2.0x), maximum leverage ratios (≤ 3.5x net debt/EBITDA), and minimum liquidity thresholds. Covenant breaches can trigger acceleration of outstanding balances and cross-default provisions across other debt instruments. For mid-market businesses with $10–$100 million in revenue, revolving facilities commonly range from $2–$25 million and require audited financials, clean accounts receivable aging reports, and evidence of consistent cash flow generation. Quadient AP and AR automation platforms help businesses maintain the financial reporting accuracy and cash flow predictability that lenders demand during underwriting and ongoing covenant monitoring — particularly around working capital metrics like DSO and DPO that directly affect borrowing base calculations.