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What Is a Credit Facility?

A credit facility is a kind of loan that is taken on by corporations. A credit facility may also refer to a collection of loans that corporations take on. More often than not, a corporation sets up a credit facility that involves many different kinds of lines of credit. This is done with the aim of making funds available in case the corporation needs a fresh influx of money.

One example situation wherein a corporation might want to set up a credit facility is when it is embarking on a new project. As with many business endeavors, the new project may or may not fail. In case the project does encounter some glitches, the corporation can certainly use some additional funding. This is where the credit facility will come in handy.

A credit facility does not have to be limited to a single business project. A corporation can actually set up a credit facility that can constantly provide funds, without regard to the current project. This kind of credit facility is considered to be a revolving line of credit, which can be more beneficial to the corporation.

How does a corporation set up a credit facility? There are many ways to do this, but in the most basic idea is to get a loan, or several loans, which can serve as the source of funds. The loan, or loans, can be short-term, medium-term, or long-term. It really depends on the needs and preferences of the corporation. In addition, the financial status of the corporation will also play a huge role in the nature of the credit facility that can be set up.

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