Here at Acorn.finance we’re working hard to help our customers understand each of the products we offer.
We’re covering some Frequently Asked Questions for each subject area and more generally.
Our FAQs for Revolving Credit Facilities (RCF);
1 – What is a revolving credit facility?
- A revolving credit facility is a type of bridging loan that allows property professionals to borrow a certain amount of money according to their needs. You can think of it as an “overdraft on steroids” because it’s secured on your existing property portfolio, it provides quick access to funds for property purchase, development, or other business activities.
2 – How does a revolving credit facility work?
- Much like an overdraft, a revolving credit facility gives property professionals access to a predetermined credit limit, and they can borrow and repay funds as needed. As they repay the borrowed amount, the credit becomes available again, providing a revolving source of funds.
3 – What are the benefits of using a revolving credit facility?
- The main benefits of using a revolving credit facility are the quick access to funds. Within the pre-agreed limit funds can be drawn down as quickly as the borrower needs. In addition to this there is the flexibility in borrowing, repaying and borrowing again for the agreed term of the facility.
4 – Who can qualify for a revolving credit facility?
- Qualifying for a revolving credit facility is generally based on the equity available in your property portfolio. We’ll work with you to make sure it’s the most suitable product for your needs.
5 – What are the interest rates and fees associated with a revolving credit facility?
- The interest rates and fees for a revolving credit facility vary depending on the lender, the creditworthiness of the borrower, and the terms of the facility. We’ll work with you to ensure you get the best terms for your requirements. The important thing is to note that the set up fees are only charged once, even though you can reuse the funds throughout the term.
6 – Can a revolving credit facility be used for property development projects?
- Yes, your RCF can go towards funding the property purchase, professional fees and be used as working capital between drawdowns.
7 – What is the difference between a revolving credit facility and a traditional mortgage?
- A revolving credit facility is more flexible than a mortgage. While a mortgage provides a lump sum amount for a specific property purchase, a revolving credit facility allows property professionals to borrow and repay funds as needed, offering greater financial agility.
8 – What are the risks associated with a revolving credit facility?
- The main risk associated with this kind of facility is the potential for overborrowing and accumulating too much debt. Property professionals must be responsible in managing their borrowing and ensure they have a viable repayment plan. We’ll be working with you to make sure risks are mitigated and there’s an exit plan in place.
9 – Can a revolving credit facility be used for commercial properties?
- Yes, property professionals can use their facility for commercial properties. The type of property is not restricted, as long as it provides suitable security. But some lenders might restrict the funds available against a commercial portfolio so please discuss with our funding experts.
10 – How can I apply for a facility?
- Because this is a specialised product most lenders would expect the introduction to come through a professional broker like Acorn.finance, our experts are here to make sure it’s the right finance solution for your situation and that you get the best possible value for money.
- To apply send us details of your portfolio, what the funds are for and complete our application form.