credit facility

Credit facilities are a type of pre-approved loan which allows the borrower to borrow money on an ongoing basis over an extended period of time, rather than applying for a new loan each time the borrower needs more money. The borrower can access up to a certain amount, and can borrow when they need funds, much like how an individual uses a consumer credit card. Credit facilities are generally only made in a business or in the context of corporate finance. Types of credit facilities include committed , uncommitted , and revolving credit facilities, among others.

Typically, a credit facility includes debt covenants , the withdrawal fees and maintenance fees. The fees are determined on a case-by-case basis, taking into account the credit history and financial trustworthiness of each different borrower. Given the flexibility of credit facilities, securing a credit facility may be more difficult than securing a conventional loan.

Depending on the term of a credit facility, it can be divided into either short-term or long-term credit facility. Given the greater risks associated with long-term credit facilities, it is generally more difficult to secure than a short-term one and may involve less favorable loan terms than short-term credit facilities.

[Last reviewed in December of 2024 by the Wex Definitions Team ]

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