Legal Definitions - credit facility

A credit facility is a type of loan that allows a borrower to access funds on an ongoing basis over a period of time, without having to apply for a new loan each time they need money. It is similar to a credit card, where the borrower can access a certain amount of credit and borrow as needed.

Credit facilities are typically used in a business or corporate finance context. There are different types of credit facilities, including:

• Committed credit facilities: A lender agrees to provide a specific amount of credit to a borrower for a set period of time.
• Uncommitted credit facilities: A lender agrees to provide credit to a borrower, but the borrower is not obligated to use it.
• Revolving credit facilities: A lender agrees to provide a certain amount of credit to a borrower, which can be used and repaid repeatedly over a set period of time.

For example, a company may obtain a revolving credit facility of $1 million from a bank. The company can then borrow up to $1 million as needed, and repay the borrowed amount over time. As long as the company does not exceed the $1 million limit, it can continue to borrow and repay funds as needed.

Credit facilities can be a useful tool for businesses that need access to funds on an ongoing basis, without having to go through the process of applying for a new loan each time they need money.