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Revolving Credits
Unlike a Line of Credit, a Revolving Credit is the bank's firm commitment to
lend up to a certain amount until a specific maturity date (up to five years).
This commitment is subject to a loan agreement containing mutually agreeable
terms and conditions. Revolving credits are to be paid in full at maturity,
most often with the proceeds of a term loan having a monthly repayment schedule
over an extended period. Interest rates are usually tied to the Prime Rate.
A fee generally is charged for a Revolving Credit commitment. This is a monthly
charge from 1/4% to 1/2% per annum on the average daily-unused portion of the
committed amount.
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