01
How the limit works
What is approved, how it is drawn, and what happens when it is repaid. The mechanism everything else follows from.
Revolving credit
Eight facilities, compared properly.
A revolving limit goes by several names and comes in several shapes, and the differences are about who provides it, what stands behind it and how the limit is set. One page per facility, each covering how it works, what it costs while drawn, and who it actually suits.
Business line of credit
A line of credit is approved once and used repeatedly. Interest is charged on what is drawn rather than on the limit, which is the property that makes it the right shape for a need that keeps returning.
Read onBusiness overdraft
An overdraft is a revolving limit attached to the trading account itself, so it is used without anyone deciding to use it. That is its convenience and its main danger in one sentence.
Read onRevolving credit facility
Revolving credit facility is the general name for any limit that can be drawn, repaid and drawn again. It is also the specific name for the committed, documented version that larger businesses hold.
Read onSecured line of credit
Security is the biggest single lever on what a revolving facility costs and how large it can be. It is also the point at which a business decision starts involving assets outside the business.
Read onUnsecured line of credit
An unsecured limit gives a business access to a revolving facility without putting assets behind it. The price of that is a smaller limit, a higher rate, and a personal guarantee in most cases.
Read onInvoice-backed line of credit
Every other limit on this site is a number a lender sets and reviews. This one is calculated from the receivables ledger, so it rises as the business wins work and falls as debt ages.
Read onBusiness credit card
A business card is two products in one. Used inside the interest-free window it ordinarily costs nothing beyond the annual fee. Carried past it, it is the most expensive facility on this site.
Read onSupplier and trade credit lines
Supplier terms are a revolving credit line with a limit, a cost and a review cycle. Almost nobody manages them that way, which is why they are simultaneously the cheapest and the most expensive credit a business holds.
Read onHow to use these
Two questions narrow eight facilities to two.
The eight pages on this hub describe arrangements that share a mechanism. A limit is approved, the business uses part of it, interest runs on what is used, and repaying restores the capacity. Underneath that, they are the same instrument offered by different institutions in different wrappers.
The first question is what stands behind the limit. Nothing but the trading position produces the smallest limit and the highest rate. A general security agreement over the business improves both. Property improves both substantially and exposes an asset outside the business. A receivables ledger produces a limit that moves on its own.
The second is where the limit sits. An overdraft on the trading account is drawn and repaid automatically, which is mechanically efficient and behaviourally the easiest to drift into. A separately held line requires a transfer, and that small act of deliberation turns out to matter more than any contractual difference between them.
Two of the eight sit slightly apart. A business credit card and supplier trade credit both revolve and are almost never managed as credit, which is why they are here. Between them they represent a substantial share of what a typical small business is actually borrowing.
What is on every page
The same seven questions, answered per facility.
Every page in this tier answers the same set, so two facilities can be compared without reading both end to end.
02
What is charged, and on what
Interest on the drawn balance, a fee on the limit, and the standing charges a rate comparison hides.
03
What stands behind it
Nothing, a general security agreement, property, a guarantee or a ledger. The largest single influence on price and size.
04
How the limit is set
What a lender assesses and what a business can present that makes a limit easier to grant.
05
What happens at review
How often, what is looked at, and what can be reduced. The part businesses think about least.
06
The failure mode
How each facility goes wrong, which differs between them more than the mechanism does.
07
Where it does not fit
Every page says who should be looking at something else, because a page that only sells is not much use.
The honest limit
What this site cannot tell you.
Every rate band on this site is indicative. Nobody publishing a website in New Zealand can say what a specific business will be charged, because the price is a function of trading history, security, the amount, the usage pattern and a credit assessment, and only the lender sees all of them.
The same is true of limits, and more so. What a lender will write depends on the cash cycle, the security available and the conduct it can see in an account it may already hold, and a page naming a number would be describing a policy nobody published.
This site is an education site and a calculator. It is not a lender, a broker or a registered financial adviser, and nothing on it is personalised financial advice.
FAQ
Revolving facilities, the general questions
How many of these are really different?
Fewer than the names suggest. A line of credit, an overdraft and a revolving credit facility are the same mechanism from different providers, and the secured, unsecured and invoice-backed pages describe what stands behind that mechanism rather than a different one.
Which facility is cheapest?
The one that matches the usage. A card cleared monthly is free, trade credit within terms is free, and beyond that price depends on security and on how much of the limit is actually drawn. Comparing rates alone will not answer it.
Can a business hold more than one?
Frequently, and it takes care. Two facilities secured on the same assets have to be resolved between the lenders, and a general security agreement held by one can prevent another taking the position it needs.
Is a limit the same as having the money?
No. A limit is permission to borrow, granted by a party that can reconsider on the terms in the agreement. Treating one as capital is the mistake that turns a useful facility into a false sense of security.
How often are facilities reviewed?
Periodically, on a cycle set in the agreement and commonly annually. The review looks at the trading position and the usage pattern, and a facility that has moved and cleared reviews considerably better than one sitting near its limit.
What is the most common mistake?
Letting a facility harden. With no schedule forcing the balance down, a limit can drift into permanent use over a year or two, at which point the business is carrying term debt at a revolving rate.
Is security always required?
Not always, and a general security agreement over the business is common even on facilities described as unsecured. A personal guarantee is common on unsecured limits regardless of whether asset security is taken.
Does this site arrange any of these?
No. It is an education site with a calculator and one disclosed referral to Prospa. There is no contact form, no application, and no personal details are collected anywhere on the site.