Legal Definitions - Uncommitted credit facility

An uncommitted credit facility is a type of short-term credit that is available at the discretion of both the borrower and the lender. This means that the lender is not obligated to provide credit to the borrower, and the borrower is not obligated to use the facility. It can be terminated at any time.

Businesses often use uncommitted credit facilities to meet their short-term working capital needs, such as payroll. For example, a small business may have a line of credit with a bank that they can use to cover expenses during a slow month. If they don't need to use the credit, they don't have to, and they won't be charged any interest or fees.

Compared to committed credit facilities, uncommitted credit facilities are more flexible but also less reliable. With a committed credit facility, the lender is obligated to provide credit to the borrower, which can be helpful for businesses that need a more consistent source of funding.