A committed lending arrangement under which a borrower may draw, and in a revolving facility repay and redraw, up to a stated maximum during a defined availability period.
The longer version
A facility differs from a single-advance term loan in that the credit agreement governs a series of future draws. Each draw carries its own conditions precedent, so the closing does not end the document work. Borrowing base certificates, compliance certificates, and updated collateral schedules keep arriving for the life of the availability period.
That ongoing cadence is what makes facilities administratively heavy. The lender has to hold a current view of the collateral and the covenants at every draw, and the file has to show that each advance was made against satisfied conditions, because that is what an examiner tests later.
Common questions
- What is the difference between a revolving and a delayed draw facility?
- A revolving facility lets the borrower repay and redraw within the limit. A delayed draw facility allows multiple advances up to the commitment but repaid amounts cannot be borrowed again.
- What conditions apply to each draw?
- The credit agreement lists them. Common ones are no default outstanding, representations still true, an updated borrowing base or compliance certificate, and in construction facilities the inspector's sign-off on work in place.
- Why does a facility create more file work than a term loan?
- Because every advance is its own small closing. The evidence that conditions were met has to be captured at the time of each draw, not reconstructed at maturity.