How much does a revolving credit facility cost? A UK SME guide
The cost of a revolving credit facility is one of the most common questions business owners ask, and one of the least clearly answered by lenders. That's partly because the total cost depends on how you use the facility, not just the rate quoted. Understanding how the pricing works puts you in a much stronger position to compare products and assess whether the economics make sense for your business.
This guide explains the different cost components of a revolving credit facility, how to calculate what you'd actually pay, and what factors affect the rate you're offered.
The two things that determine what you pay
Before getting into the numbers, it's important to understand that revolving credit pricing has two dimensions most other loans don't:
- The rate — what you're charged on drawn balances (daily, monthly, or annualised)
- Your usage — how much you draw, and for how long
Unlike a term loan where you can calculate your total repayment cost upfront (loan amount x rate x term), revolving credit cost is dynamic. Draw more, for longer, and you pay more. Draw less, repay quickly, and you pay less. This is actually one of the product's key advantages, but it means the cost conversation requires more than just a rate comparison.
The main cost components
1. Interest on drawn balances
This is the primary cost. Interest is charged on the amount you have outstanding, your drawn balance, not on your total approved limit.
Most revolving credit products express their cost as a monthly fee on the drawn balance, or as a daily rate. Some lenders use an annualised rate (APR) for comparison purposes.
Example: - Facility limit: £100,000 - Amount drawn: £40,000 - Monthly interest rate: 2.5% - Monthly interest cost: £1,000
If you repay the £40,000 after two months, your total interest cost would be approximately £2,000. The remaining £60,000 of your limit generated no interest cost at all during that period.
Compare this to a term loan of £40,000 at the same rate: you'd be paying interest on the full £40,000 from month one, even if you hadn't yet deployed all the capital.
2. Facility fees (where applicable)
Some lenders charge a facility fee, either as a one-off arrangement fee, an annual renewal fee, or a combination. This is a fixed charge for maintaining the facility, separate from interest on drawn balances.
Not all lenders charge this. When comparing products, factor any facility fees into your total cost calculation, particularly if you expect to use the facility only periodically. A facility fee charged on a £150,000 limit matters more if you're only drawing £20,000 at a time.
3. Drawdown fees (where applicable)
Some products charge a small fee each time you draw funds. Again, not universal. If you plan to draw frequently (e.g., monthly), this can add up. If you draw infrequently, it may be negligible.
4. Early repayment penalties (where applicable)
Some lenders charge a fee if you repay drawn balances ahead of schedule. With Juice Flex, there are no early repayment penalties. If you repay early, you simply stop accruing interest. No additional charge. This is worth confirming explicitly with any lender you're comparing.
What affects the rate you're offered?
Revolving credit rates are not fixed across all borrowers. The rate you're offered is based on a risk assessment of your specific business. The primary factors:
Trading history — Lenders want to see a track record. Most require a minimum of 12 months' trading, often longer. More established businesses typically access lower rates.
Annual turnover — Higher turnover generally correlates with lower risk and better pricing. It also determines the upper limit of what you can borrow.
Credit history — Both your business credit profile and, for smaller businesses, your personal credit history will be reviewed. A clean credit history with no defaults, CCJs, or missed payments supports better pricing.
Facility size — Larger facilities can sometimes attract lower rates relative to smaller ones, though this varies by lender.
Profitability and cash flow — A business with strong, consistent cash flow is a lower-risk borrower and may access more competitive terms.
Sector — Some sectors are perceived as higher risk than others. This can influence both whether you're approved and the rate you're offered.
How to calculate your actual cost
Rather than comparing rates in isolation, calculate the total cost based on how you expect to use the facility.
Step 1: Estimate your average drawn balance Think about typical usage. If you draw £50,000 at the start of each month and repay most of it by month end, your average drawn balance might be closer to £25,000.
Step 2: Estimate how long you'll typically hold a balance A retailer drawing for pre-season stock and repaying over three months has a very different cost profile to a contractor drawing for eight weeks per project.
Step 3: Apply the monthly rate Multiply your expected average drawn balance by the monthly rate, then multiply by the number of months you'd typically hold the balance.
Worked example: - Average drawn balance: £35,000 - Hold period: 2 months - Monthly rate: 2% - Total interest cost: £35,000 x 2% x 2 = £1,400
Step 4: Add any fees If there's a facility fee or drawdown fee, add those to get a total annual cost.
Step 5: Compare to the alternative What's the cost of not having the facility? A missed bulk-buy opportunity, a late payment penalty from HMRC, a supplier relationship damaged by late payment, or lost revenue from being out of stock. If the cost of the facility is lower than the cost of the problem it solves, the economics work.
Revolving credit vs. other products: a cost comparison
Rate comparisons between financial products can be misleading without context. Here's a framework.
| Product | Rate Basis | Interest Charged On | Flexibility | Best Cost Scenario |
|---|---|---|---|---|
| Revolving credit facility | Monthly rate on drawn balance | Drawn balance only | Very high | Short draw cycles, full repayment between uses |
| Business term loan | Fixed rate on full balance | Full outstanding loan | Low | Single large investment, long payback period |
| Business overdraft | Annual rate, daily accrual | Overdrawn balance | Medium | Very short-term gap, rarely used |
| Invoice finance | Discount rate on invoice value | Invoice face value | Medium | High debtor days, consistent invoice flow |
| Business credit card | High APR | Balance carried | High | Day-to-day spend, repaid in full monthly |
The key insight: a revolving credit facility with a nominally higher rate than a term loan can be cheaper in absolute terms if you use it correctly, drawing only what you need and repaying promptly.
Cost red flags to watch for
When comparing revolving credit products, be alert to the following:
Rate quoted on drawn balance vs. total limit. Some lenders quote an attractive rate but charge it on your total credit limit, not just the amount drawn. This increases the effective cost considerably if you're not fully drawn.
Compounding interest. Understand whether interest on unpaid balances compounds. Simple daily or monthly interest is more transparent.
Minimum monthly fees. Some products charge a minimum monthly fee even if you haven't drawn anything. Factor this into your calculation of what it costs to hold the facility open.
Automatic renewal fees. Annual renewal fees can catch businesses off guard if not clearly disclosed upfront.
Rate changes on review. Rates on revolving facilities can be revised at the lender's periodic review. This is a normal part of revolving credit but worth understanding. Your rate today may not be your rate in 12 months.
What does Juice Flex cost?
Juice Flex pricing is based on your individual business circumstances. There is no single published rate because the right rate depends on your trading history, turnover, credit profile, and facility size.
What we can tell you:
- Interest is charged only on drawn balances, never on your undrawn limit
- There are no early repayment penalties. Repay early and you stop accruing interest
- Facilities range from £25,000 to £1,000,000, subject to status and lending criteria
- Checking your eligibility has no impact on your credit score
To understand what Juice Flex would cost for your specific business, the fastest route is to check your eligibility online. You'll get a personalised view based on your business's actual circumstances.
Check your eligibility and see your indicative terms →
Key takeaways
- The cost of a revolving credit facility is driven by your drawn balance and how long you hold it, not your total limit
- Interest is charged only on what you've actually borrowed
- Compare total cost in use, not just headline rates, against alternative products
- No early repayment penalties mean you can reduce costs by repaying as soon as cash is available
- Always factor in facility fees, drawdown fees, and any minimum charges when comparing products
Further reading
- What Is a Revolving Credit Facility? — The plain-English guide to how it works
- Pros and Cons of a Revolving Credit Facility for UK Businesses — A balanced assessment
- Is a Revolving Credit Facility Right for My Business? — Self-qualification checklist
Subject to status and lending criteria. Juice Flex is provided by Juice Ventures Limited, registered with the Financial Conduct Authority.