Revolving credit facility

A committed credit line a company can draw, repay and draw again up to a limit during its term, much like an overdraft. It pays interest on what is drawn and a smaller commitment fee on what is not, so the lender is paid for keeping the money available.

A company with a ₹500 crore facility, ₹180 crore drawn at 9% and a 0.35% fee on the undrawn ₹320 crore pays ₹16.2 crore of interest and ₹1.12 crore of fees, ₹17.32 crore in all.

In a three-statement model the revolver is the usual balancing figure: when forecast cash falls below the minimum the business needs, the model draws on it, and when cash builds up, the model repays it. Interest depends on the balance and the balance depends on cash after interest, which creates a circular reference the model must handle deliberately. Indian working capital lines, such as cash credit, behave the same way.

A revolver fully drawn is a warning, not a resource.