Revolving credit facility vs term loan: which is right for your business?
Updated on 27 May 2026.
Part of our Revolving credit facility guide.
When a term loan is the right tool, when a revolving credit facility is, and how to think about the total cost of either across the life of a working-capital cycle. For the structural deep-dive, see fixed-term loan vs revolving credit.
The core difference in one sentence
A term loan gives you a fixed sum of money that you repay over a fixed period. A revolving credit facility gives you a pre-approved credit limit that you can draw from repeatedly, repay, and draw again.
How a term loan works
When you take out a term loan, you borrow a specific amount (say £150,000) and agree to repay it in monthly instalments over an agreed term, typically 12 to 60 months. Interest is charged on the outstanding balance. For more on when this structure is the right fit, see when a business loan makes sense.
How a revolving credit facility works
A revolving credit facility works differently. You’re approved for a credit limit (let’s say £150,000) but you don’t have to draw it all at once, or at all. You draw what you need, when you need it. When you repay, that credit becomes available again. The mechanics are in how does a revolving credit facility work.
Use cases: when each product makes sense
Scenario 1. Buying a piece of equipment
Best choice: term loan or asset finance.
Scenario 2. Cover a VAT bill while waiting for customer payments
Best choice: revolving credit facility.
Scenario 3. Stocking up for peak season
Best choice: revolving credit facility.
Scenario 4. Funding a specific marketing campaign with a defined budget
Best choice: either, depending on scale and confidence.
Scenario 5. Scaling with unpredictable capital needs over 12 to 24 months
Best choice: revolving credit facility.
Scenario 6. Refinancing existing debt at a lower rate
Best choice: term loan.
The true cost calculation
People often compare term loans and revolving facilities on headline rate alone. That’s the wrong comparison. The actual cost depends on how much you draw, for how long, and how often.
For working capital needs, which are inherently short-cycle and unpredictable, the revolving facility’s cost profile typically works out lower in practice, even when the quoted rate looks higher.
Common misconceptions
- “Term loans are always cheaper.” Not necessarily. The comparison should be made on total cost of funds given your expected usage pattern, not headline rate.
- “Revolving facilities are only for struggling businesses.” A persistent myth. Financially healthy, fast-growing businesses use revolving credit facilities as a strategic tool.
- “I should take out the maximum I can get.” With a revolving facility, you only pay for what you draw. With a term loan, the opposite is true.
If you’re currently servicing a term loan and weighing whether to move, switching from a business loan walks through the considerations.
How Juice Flex fits in
Juice Flex is a revolving credit facility built for UK SMEs. It’s not a term loan and it’s not a bank overdraft. It’s a purpose-built revolving facility for businesses that need capital to move as fast as their opportunities.
Ready to check your eligibility?
Juice Flex is available to UK limited companies and LLPs with monthly turnover of £20,000 or more. Facilities run from £50,000 to £1,000,000, subject to status and lending criteria. Checking your eligibility uses a soft credit search, so there’s no impact on your credit score.