What is a revolving credit facility (revolver) and how does it work?
A revolver is a loan which can be drawn down and repaid. In a business context, a revolver frequently is secured by the borrower’s receivables and/or inventory. This kind of asset-based loan is designed to optimize the availability of working capital from the borrower’s current asset base. Here’s how it works. The borrower grants a security interest in its receivables and/or inventory to the lender as collateral to secure the loan. This grant of security interest creates the borrowing base for the loan. As receivables are paid, the cash is turned over to the lender to pay down the loan balance. When the borrower needs additional working capital, the borrower requests another advance. The lender manages a revolving credit facility and the related collateral in order to offer the borrower the largest possible loan amount at any given time. Because the borrower’s customers are generally not notified of the assignment of the accounts to the lender, the borrower continues to service its rec
Answer – A revolver is a loan that can be drawn down and repaid. In a business context, a revolver frequently is secured by the borrower’s receivables and/or inventory. This kind of asset-based loan is designed to optimize the availability of working capital from the borrower’s current asset base. Here’s how it works: The borrower grants a security interest in its receivables and/or inventory to the lender as collateral to secure the loan. Advance rates are applied against the pledged collateral which creates the borrowing base for the loan. As receivables are paid, the cash is turned over to the lender to pay down the loan balance. When the borrower needs additional working capital, the borrower requests another advance. The lender manages a revolving credit facility and the related collateral in order to offer the borrower the largest possible loan amount at any given time. Because the borrower’s customers are generally not notified of the assignment of the accounts to the lender, th
