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| Feature | Question to ask |
|---|---|
| Approved limit | How much can I draw after fees, reserves or restrictions? |
| Interest | Is it calculated on the daily drawn balance, and can the rate change? |
| Facility or service fee | Does it apply to the entire limit even when unused? |
| Repayments | Is principal due each week or month, as well as interest and fees? |
| Access and renewal | When can drawings be suspended, the limit reduced or the facility reviewed? |
| Exit | What happens to an outstanding balance if the facility is not renewed? |
How revolving credit differs from a term loan
A term loan advances an agreed amount with a repayment schedule. A revolving facility is built around a limit and repeated use. Repayment can restore available credit, subject to the agreement and continued access.
That flexibility is helpful for a business which buys stock several times a year and collects sales proceeds later. For one large purchase with a predictable payback period, compare a term or asset loan as well.
Follow one draw from purchase to repayment
Suppose a business has a $50,000 limit and draws $20,000 for stock. The remaining $30,000 is potential headroom under the agreement, not cash already held in the bank. If $8,000 of principal is repaid, available credit may rise again, provided access remains open and no other amounts reduce it.
Check whether the provider operates one revolving balance or gives each draw a separate repayment schedule. Ask how payments are allocated between fees, interest and principal, and what happens to the minimum payment after another draw. The word “revolving” does not answer those questions.
A facility requiring principal repayments can reduce debt steadily, but it also needs cash while the funded stock is still unsold. A facility with a different payment structure creates a different end position. Request a worked schedule using your intended draw dates and amounts.
Price the limit and the drawn balance separately
Consider a purely illustrative $50,000 facility with a $100 monthly facility fee and a 12% annual interest rate calculated on drawn funds. If $20,000 remains drawn for one month, approximate simple interest for that month is $200, making $300 with the fee. If nothing is drawn, the $100 fee remains. Actual products may calculate charges daily, require repayments and apply other fees.
This is why comparisons need the same usage pattern. A larger limit can cost more even when you borrow the same amount. Conversely, a facility with a higher usage rate but lower standing charges might deserve attention if it is rarely drawn. Obtain actual quotations before drawing either conclusion.
Look closely at the unused facility
Product structures vary. Prospa's published line of credit information includes a weekly service fee calculated on the facility limit, alongside interest on funds used and required repayments. It also describes conditions on drawings and periodic review (checked 5 October 2026).
This is why a rarely used limit can still cost money. Ask for examples based on your expected balance: unused, partly drawn and fully drawn. Use the same pattern when comparing providers.
Check whether the balance actually comes back down
Consider an illustrative retailer drawing $25,000 to buy seasonal stock. Mark the supplier payment, required repayments and expected customer receipts on a weekly forecast. When sales money arrives, show how much remains after replacement stock, wages, tax and overheads. That is the cash available to reduce the facility.
Move those receipts back a month and repeat the exercise. The unused limit must be enough to cover a realistic delay within the agreed terms; a hoped-for increase is not a reserve.
If the balance stays near the limit even after the stock sells, investigate what is consuming the receipts. The business may need a longer-term funding plan or a change in its trading economics. Repeated drawings work better when there is a visible cycle of borrowing and repayment.
Separate seasonal use from a permanent funding need
If the balance falls after a busy season and rises ahead of the next, revolving credit may match the pattern. If a core amount never gets repaid, ask whether part of the requirement belongs in a term facility with a defined reduction schedule. Keeping long-lived equipment permanently funded through a reviewed credit limit can leave its funding exposed to a later access change.
A buffer also has limits as an emergency plan. Several things can happen together: weaker sales, increased drawings and a lender requesting updated records. Test the business without assuming that every unused dollar will remain available under every circumstance.
What to establish before you open the facility
Prepare evidence of the recurring gap, not just the largest desired limit. Include bank activity, existing facilities, a forecast and the explanation of when balances should reduce. Ask whether a review requires new statements or accounts, whether a limit increase triggers another assessment and what notice applies to renewal decisions.
Record the exit process as well. Closing a facility can involve repaying the drawn balance, accrued charges and any other amounts due, followed by the relevant release of security. Ask whether the agreement has minimum fees or notice obligations. A facility you barely use may still deserve closing if its cost exceeds its value, but obtain the final terms before acting.
Read the review and security terms
Check reporting obligations, default events, guarantees and any security. Ask whether an annual or periodic review requires fresh financial information and whether the lender can change the limit. Available credit should not be treated as an unconditional cash reserve.
Choose a limit you can explain from the forecast, then price that pattern of use. Paying to keep a larger limit open is worthwhile only where the additional access serves a real need.
Selected revolving facilities and their standing charges
Provider information checked on 10 October 2026. This table compares revolving products, including an overdraft. OnDeck’s verified Australian products are term loans, so they are not labelled as lines of credit here.
| Provider / product | Limit and duration | Fee basis and repayment condition |
|---|---|---|
| Prospa line of credit | Up to $500,000; two-year reviews; contractual pay-down term applies | 0.046% of the full limit weekly, plus interest on drawn funds. Minimum two years trading and $6,000 monthly turnover. |
| Shift Business Overdraft | $10,000–$2 million; revolving facility up to five years | Published variable rate 14.95%–24.95%; $495 annual fee at limits up to $100,000, otherwise $795. Repayments weekly or monthly; conditions apply. |
| Lumi line of credit | Maximum five years, resetting for each draw; annual review | Establishment fee relates to the approved limit at first draw. No ongoing holding fee published; obtain the actual rate, limit and repayment schedule. |
Prospa’s 0.046% weekly service fee on a $40,000 limit is $18.40 a week. A 52-week annualisation gives $79.73 a month on average, before interest. Multiplying by four understates a year’s weekly charges. Some Prospa security statements differ between its overview and FAQ; obtain written confirmation for the proposed limit.
An overdraft usually operates through a transaction account; a separately drawn line of credit may have its own draw and repayment process. Product names do not tell you the repayment obligation. Compare bank overdrafts and their facility fees alongside the contract’s access and review terms.