Revolving facility

The umbrella term, and what sits under it.

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.

Last reviewed 8 September 2026

Indicative interest cost

Weekly

Disclaimer

$296/week

$1,283 /month $15,400 a year while drawn

Facility limit $300,000

$5,000 $500,000

Average drawn balance $140,000

Nothing drawn Fully drawn

Indicative rate 11.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

The short version

Five lines that untangle the term.

It is a category as often as a product. Loosely used it means any limit that revolves, which includes an overdraft and a business line.
The documented version has a term. An availability period, a maturity date and frequently covenants, which an overdraft ordinarily does not have.
Committed and uncommitted are different things. A committed facility has to remain available for its term. An uncommitted one can be withdrawn, which is most overdrafts.
The consumer version is a mortgage feature. A revolving credit home loan is a different product with different rules, and conflating the two causes real confusion.
Indicative only. Every figure here is illustrative. Actual terms come from the lender after assessment.

Three uses of one phrase

What is being described, in each case.

The first question worth asking anyone using the phrase is which of these they mean, because the answers differ on almost every row.

Feature	As a category	As a documented facility	As a mortgage feature
Covers	Overdrafts and business lines	A specific agreement	A home loan account
Has a stated maturity	Not necessarily	Yes	Tied to the loan
Commitment	Varies	Ordinarily committed	Per the loan terms
Covenants	Rare	Common at larger amounts	Not in that form
Who holds one	Any business	Larger or more substantial borrowers	Homeowners
Regulated as	Business credit	Business credit	Consumer credit, ordinarily

The last row matters more than it looks. A revolving credit home loan is consumer lending with the protections that come with it, and a business facility is not, which is one reason the two should never be reasoned about together.

The documented version

What a committed facility actually gives.

A committed revolving credit facility obliges the lender to make the limit available for the agreed period, provided the business complies with the agreement. That is a materially stronger position than an overdraft, which is ordinarily uncommitted and repayable on demand however comfortable the relationship feels.

The price of that commitment is a commitment fee, charged on the undrawn portion, and ordinarily a set of covenants the business has to keep. Interest cover, gearing and minimum tangible net worth are the usual shapes, tested periodically, with consequences set out for a breach.

It also has a maturity. At the end of the term the facility does not simply continue; it is refinanced, extended or repaid. A business relying on a revolving facility for permanent working capital needs to know when that date is and to start the refinancing conversation well before it.

Availability period

Stated

Maturity

A date

Commitment fee

On the undrawn portion

Covenants

Frequently

Worked example

A $300,000 committed facility across two years.

A manufacturer holds a $300,000 committed revolving facility for a two-year term at an indicative 11%, with a commitment fee of 0.4% on the undrawn portion. Drawings average $140,000 across the period.

Interest on the average drawn balance is roughly $15,400 a year. The commitment fee on the average undrawn $160,000 is around $640 a year. Total annual cost is in the order of $16,000, plus establishment costs in year one.

The comparison against an overdraft at the same drawn balance is not simply about rate. The committed facility costs a commitment fee an overdraft would not charge, and in exchange the limit cannot be withdrawn for two years. Whether that certainty is worth several hundred dollars a year is a straightforward question with a different answer for a stable business than for one in a cyclical sector.

Illustrative figures

Facility: $300,000
Average drawn: ~$140,000
Indicative rate: 11%
Interest a year: ~$15,400
Commitment fee a year: ~$640

Illustrative on stated assumptions and rounded. Not a quote or offer of credit.

The covenants

Four terms worth understanding before signing.

These appear on larger facilities and are frequently the part least examined at the point of signing.

Interest cover

Earnings measured against the interest they have to cover, tested periodically. It moves with trading, so a soft half-year can breach it without any change in borrowing.

Gearing

Debt measured against equity or against total assets. Leases arriving on the balance sheet under NZ IFRS 16 can affect this for entities in scope without anything about the business changing.

Minimum tangible net worth

A floor under the net assets excluding intangibles. A large write-down can breach it, which is why the definitions in the agreement matter as much as the concept.

Review and information undertakings

What has to be provided and when. These are the easiest covenants to breach, because they are administrative rather than financial and nobody diarises them.

The question to ask first

Committed or uncommitted decides how much the facility is worth.

An uncommitted facility can be reduced or withdrawn, ordinarily on the terms in the agreement and sometimes on demand. A committed one has to remain available for its term while the business complies. Those are very different products and both are described as revolving credit facilities in ordinary conversation. Asking directly, and reading the answer in the agreement rather than taking it verbally, is the single most useful thing a business can do before relying on a limit for anything that matters.

The trade

What the documented version gives and costs.

What it gives

Certainty that the limit remains available for the agreed term
A larger facility than an overdraft is ordinarily written at
Pricing that reflects a documented, secured and covenanted position
A structure lenders understand and syndicate comfortably at size
Terms that are negotiated rather than standard-form

What it costs

A commitment fee on the undrawn portion, which an overdraft does not charge
Covenants that can be breached by trading rather than by borrowing
Reporting obligations with real consequences for missing them
A maturity date that has to be refinanced rather than rolling automatically
Establishment and legal costs proportionate to a negotiated document

The consumer confusion

Why the phrase means something else to most New Zealanders.

For most people in New Zealand, revolving credit means a home loan feature: an account where the loan limit reduces over time, salary is paid in, and everything sitting in the account offsets interest. It is a genuinely useful consumer product and it has almost nothing in common with a business facility beyond the word.

The confusion matters because search results and general advice mix the two constantly. A business owner reading about revolving credit will find explanations of mortgage offsetting, minimum limit reductions and paying the loan down faster, none of which describes a business facility.

This site covers business facilities. Where the consumer product is relevant, it is because a business owner is considering using a revolving credit mortgage on a personal property to fund a business, which is a real and serious decision covered in its own guide because the security involved is the family home.

The process

What arranging a documented facility involves.

Generalised rather than specific to any lender. This is a considerably heavier process than an overdraft application.

01
Financial information
Audited or reviewed financial statements, management accounts, forecasts and a description of the cash cycle. At the amounts where this facility is written, the lender expects a level of financial reporting an overdraft application would not.
Documents commonly required
- Financial statements
- Management accounts
- Cash flow forecast
02
Structure and covenants
The limit, the term, whether it is committed, the margin and the covenant package. This is negotiated rather than offered, and the covenant definitions are worth as much attention as the pricing.
03
Security and documentation
Security is ordinarily taken and documented properly, with legal costs on both sides. Where another lender holds an existing general security, a priority arrangement between them is required.
Documents commonly required
- Security documents
- Priority deed where applicable
04
Conditions precedent and drawdown
A list of things that have to be in place before the first drawing, which commonly includes searches, certificates and evidence of insurance. Working through them takes longer than businesses expect.

The honest limit

Who this is actually for.

A documented committed facility is a larger-business instrument. The negotiation, the legal cost, the covenant package and the reporting obligations are proportionate to a substantial amount, and applying that machinery to a $50,000 requirement is a poor use of everyone’s time.

For most small New Zealand businesses the practical choice is between an overdraft and a business line of credit, both of which are covered on their own pages and neither of which involves any of this. The value in understanding the documented version is knowing what the next tier looks like and asking the committed-or-uncommitted question of whatever is being offered now.

Where a business has grown into this territory, the change worth preparing for is the reporting rather than the price. A lender writing a committed facility expects information on a schedule, and a business without the finance function to produce it will find the relationship harder than the rate suggested.

Renewal

What happens as a maturity date approaches.

A committed facility has an end date, and the twelve months before it are more consequential than businesses expect. The lender is deciding whether to extend, on what terms and at what size, and it is making that decision against the most recent trading rather than against the position when the facility was written.

Starting the conversation six months out rather than one month out changes the outcome more often than any negotiation on the day. It leaves room to present a full set of accounts, to fix a covenant that has drifted, and to approach an alternative lender if the answer is unattractive, none of which is possible in the final weeks.

The failure mode is a business that treats a maturity date as an administrative renewal and finds it is a fresh credit decision. Where the facility funds working capital the business genuinely needs, that discovery in the last month is a considerably worse position than the same discovery six months earlier.

Reporting

The obligation that is easiest to breach.

Financial covenants get the attention and information undertakings cause more breaches. A facility requiring management accounts within a stated number of days of month end, or annual financial statements within a period of balance date, is imposing a real operational discipline, and it is one that slips quietly in a busy year.

A missed reporting deadline is technically a breach in the same way a missed ratio is, and lenders respond to it as a signal about how the business is run rather than as a paperwork issue. Where accounts are consistently late, a lender starts to wonder what else is late.

The remedy is administrative and dull. The reporting dates belong in the same calendar as tax dates and payroll, with a person responsible, and where the business genuinely cannot meet a deadline, telling the lender in advance is treated very differently from missing it silently.

The cost while drawn

What a drawn balance costs to carry.

A revolving facility charges interest on what is drawn, and a commitment fee on what is not. This shows the first. Indicative only, and not a quote or offer of credit.

Indicative interest cost

Weekly

Disclaimer

$296/week

$1,283 /month $15,400 a year while drawn

Facility limit $300,000

$5,000 $500,000

Average drawn balance $140,000

Nothing drawn Fully drawn

Indicative rate 11.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

References

Sources

Reserve Bank of New Zealand, statistics
Context for New Zealand business lending rates and why indicative bands move.
External Reporting Board
Backs the note that leases recognised under NZ IFRS 16 can affect a gearing covenant.
Commerce Commission
The regulator whose guidance covers lender conduct and disclosure.
Personal Property Securities Register
Backs the description of security registration and priority arrangements between lenders.
Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.

FAQ

Revolving credit facility in New Zealand, questions answered

What is a revolving credit facility?

Loosely, any limit that can be drawn, repaid and drawn again, which includes overdrafts and business lines. Precisely, a documented facility with a stated term, an availability period and frequently covenants, which is what larger borrowers are offered.

What does committed mean?

That the lender is obliged to keep the limit available for the agreed term while the business complies with the agreement. An uncommitted facility can be reduced or withdrawn, which is the position most overdrafts are in.

What is a commitment fee?

A charge on the undrawn portion of a committed facility, paid for the lender holding capital available. It is the price of the certainty, and an uncommitted facility does not charge it because it offers no certainty.

How is it different from an overdraft?

An overdraft sits on the trading account, is ordinarily uncommitted and rarely carries covenants. A documented revolving facility is a separate agreement with a term, a maturity date and frequently covenants, written at larger amounts.

What covenants are common?

Interest cover, gearing and minimum tangible net worth, tested periodically, alongside information undertakings about what must be provided and when. The definitions in the agreement matter as much as the concepts.

Can a covenant be breached without borrowing more?

Yes, and that is the point worth understanding. A soft half-year can breach interest cover, and leases recognised under NZ IFRS 16 can affect gearing for entities in scope, both without any change in what is drawn.

What happens at maturity?

The facility does not roll automatically. It is refinanced, extended or repaid, and a business relying on it for permanent working capital should be starting that conversation well before the date rather than at it.

Is a revolving credit home loan the same thing?

No. That is a consumer mortgage feature with different mechanics and different regulation, and it is the meaning most New Zealanders encounter first. Reasoning about the two together causes real confusion.

How large does a business need to be?

The documentation, negotiation and reporting are proportionate to a substantial amount, so this is generally a larger-business instrument. Smaller businesses are ordinarily better served by an overdraft or a business line of credit.

What should be asked before signing?

Whether the facility is committed or uncommitted, what the maturity date is, what the covenants are and how they are defined, and what has to be reported and when. All four are in the document and all four have consequences.

Is security required?

Ordinarily yes at these amounts, and documented properly with legal costs on both sides. Where another lender already holds a general security, a priority arrangement between the two lenders is required before drawdown.

Is this page financial advice?

No. It describes how a facility works in general terms. This site is not a lender, a broker or a registered financial adviser, and whether this structure suits a particular business depends on facts a website cannot see.