What is a revolving loan facility — is it different from a revolving credit facility?

What is a revolving loan facility — is it different from a revolving credit facility?

In the wider world of business finance, you will frequently hear the terms “revolving loan facility” and “revolving credit facility” used to describe the same type of borrowing. Both agreements allow a borrower to draw down funds, repay them, and draw them down again as needed. However, when we look at the specialized UK property investment sector, understanding the nuances of how these facilities are structured is incredibly important for active landlords.

For UK buy-to-let (BTL) landlords, this concept is best understood through a secured property facility. Promise Money offers a BTL Revolving Credit Facility, which is a highly specific, secured second-charge financial product. This is not an unsecured business loan, a personal credit card, or a generic corporate revolving line of credit. Instead, it is a secured facility designed specifically to help property investors manage their cash flow and grow their portfolios efficiently.

Are they actually different?

Technically, in traditional corporate banking, there is very little difference between a revolving loan facility and a revolving credit facility. Both options provide a flexible pool of capital that you can access on demand. However, in some financial contexts, a revolving loan may have more structured, pre-agreed drawdown dates and fixed repayment schedules for each portion of cash you borrow.

In contrast, a revolving credit facility (RCF) generally operates much more like an overdraft. It gives you the continuous freedom to borrow, repay, and borrow again up to a pre-approved limit. In the UK property market, the term revolving credit facility is more common because of this high level of flexibility. For landlords, this facility sits behind your existing first-charge mortgage as a second charge, meaning your primary mortgage remains completely untouched.

How a secured BTL revolving credit facility works

Instead of applying for a new loan every single time you need capital, a property revolving credit facility acts as a secured line of credit. Once your facility is arranged and secured against your residential buy-to-let property, you gain ongoing access to funds.

A major benefit of this setup is that interest is only charged on the money you have actually drawn down, not on your total facility limit. For example, if you have a facility limit of £150,000 but only draw down £30,000 to fund a quick renovation, you will only pay interest on that £30,000. Furthermore, once the facility is fully established, you can typically draw down your required funds within 24 to 48 hours.

Real-world scenarios for buy-to-let landlords

Active property investors often face situations where they need fast, flexible capital. A secured revolving credit facility could be highly useful in several common scenarios:

• Auction purchases: Buying a property at auction requires speed. If you win a bid, you typically need to pay a 10% deposit immediately and settle the remaining 90% balance within 28 days. A revolving facility allows you to draw down the necessary cash almost instantly.
• Refurbishment and EPC upgrades: With changing UK energy standards, landlords may need to upgrade their properties to meet higher Energy Performance Certificate (EPC) ratings. Drawing funds from a revolving facility allows you to pay contractors quickly, and you can repay the debt once your tenant moves in.
• Covering void periods: If a property sits empty between tenancies, your regular mortgage payments do not stop. You could use your facility to cover these quiet periods, repaying the balance when rental income resumes.
• Portfolio expansion deposits: When a new investment opportunity arises, you can draw down deposit funds from your existing facility to secure the new property without waiting for a slow remortgage to complete.

How it compares to bridging finance and remortgaging

When UK property investors need to raise capital, they generally look at two traditional alternatives: bridging finance or remortgaging. Here is how a secured revolving credit facility compares to these options.

Bridging finance

Bridging loans are helpful for short-term property needs, but they can be rigid and expensive. Bridging loans are typically categorized as either open or closed. An open bridging loan has no fixed exit date, though it will usually have a maximum term, such as 12 to 24 months. A closed bridging loan has a specific, predetermined exit date.

Furthermore, most bridging loans roll up interest, meaning monthly payments are not typical. While this can help with monthly cash flow, the total debt increases rapidly over time. Additionally, every time you want to use bridging finance, you must submit a completely new application, undergo new valuations, and pay separate legal fees. A revolving credit facility avoids this constant reapplication process.

Remortgaging

Remortgaging to release equity from an existing property is another common route. However, remortgaging can be incredibly slow and may trigger expensive Early Repayment Charges (ERCs) if you exit your current mortgage deal early. If you secured a highly competitive, low fixed-rate mortgage a few years ago, remortgaging today could mean switching your entire first-charge mortgage balance to a much higher current interest rate.

A secured revolving credit facility sits as a second charge behind your first mortgage. This means you do not have to touch your primary mortgage rate or pay costly early exit fees, making it a much more cost-effective way to access your property equity.

Managing risks, credit checks, and compliance

While a revolving credit facility offers incredible financial flexibility, it is crucial to understand that it is a secured debt. Your property may be at risk if repayments are not made. If you default on your payments, this could lead to serious consequences, including legal action, repossession of your investment property, increased interest rates, and additional administrative charges.

Before any lender approves a revolving credit facility, they will conduct credit searches. Keeping a close eye on your credit history is a vital step in preparing for any property finance application.

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Because the property (your home or investment property) may be at risk if you do not keep up repayments, working with an experienced professional is key. Promise Money is an FCA-authorised broker (Ref: 681423), not a lender. We are authorised and regulated by the Financial Conduct Authority (FCA), and we work to help you find the most suitable financial products for your property goals.

If you would like to find out more about how a secured second-charge revolving credit facility could benefit your buy-to-let portfolio, you can call our expert team on 01902 585020 or visit our dedicated hub at promisemoney.co.uk/landlord-revolving-credit-100.

People also asked

Is a revolving credit facility secured or unsecured?

While some general business lines of credit can be unsecured, the BTL revolving credit facility offered by Promise Money is a secured facility, meaning it is registered as a second charge against your residential buy-to-let property.

What is the difference between an open and a closed bridging loan?

A closed bridging loan has an agreed, fixed repayment date, whereas an open bridging loan has no fixed repayment date but typically must be repaid within a maximum term of 12 to 24 months.

Do I have to pay interest on my entire revolving credit limit?

No, you do not. With a revolving facility, you are typically only charged interest on the funds you have drawn down and are currently using, not on the unused portion of your limit.

How quickly can I access funds from a revolving credit facility once it is set up?

Once your secured revolving credit facility has been fully arranged, you can generally draw down funds within 24 to 48 hours whenever you need them.

Can I use a revolving credit facility to pay off a first-charge mortgage?

No, this facility is designed to sit as a second charge behind your existing first-charge mortgage, allowing you to access equity without disturbing your main mortgage agreement.