Revolving Equipment Facility
Revolving Equipment Facility is a pre-approved credit limit a business draws against to buy equipment as needed. The limit is assessed on the strength of the business rather than on any single asset. Each drawdown repays over its own term, and the available balance replenishes as repayments are made. It is also called an equipment line of credit, or simply an equipment line.
Why It Matters
A business that buys equipment repeatedly does not want to run a fresh application for every purchase. A revolving facility moves the credit assessment to the front, once, so that later purchases are a drawdown rather than a new approval. The distinguishing features are worth stating against the nearest alternatives:
- A chattel mortgage funds 1 asset under 1 loan, assessed against that asset.
- A business overdraft funds working capital, not asset purchases.
- A finance lease leaves the financier owning the asset for the term.
How It Works
- The business is assessed once and a total limit is set, based on trading strength rather than a nominated asset.
- Equipment is selected as needed and funded by drawdown against the limit.
- Each drawdown carries its own term, commonly running to 5 years per transaction.
- Settlement is typically by supplier invoice paid directly by the financier.
- As drawdowns are repaid, the available balance replenishes and can be redrawn.
Common Use Cases
- Businesses acquiring plant and equipment in stages across a year
- Operators replacing assets on a rolling cycle rather than all at once
- Fleets and workshops adding capacity as contracts are won
- Buyers who want the credit decision settled before they start negotiating on price
Related Terms
For the full explanation of how these facilities are structured and assessed, see Equipment Line of Credit in Australia, or go to Equipment Finance.