Definition
Revolving credit is a flexible debt facility that can be drawn, repaid, and redrawn up to a limit.
Formula
Available revolver = credit limit - current balance
Example
A $2M revolver with $500k drawn leaves $1.5M available.
How to use it
- Track availability daily when liquidity is tight.
- Revolvers often have covenants tied to cash flow or leverage.
Common mistakes
- Assuming full availability without checking covenant headroom.
- Using revolvers for long-term funding instead of short-term needs.
Measured as
Available revolver = credit limit - current balance
Misused when
- Assuming full availability without checking covenant headroom.
- Using revolvers for long-term funding instead of short-term needs.
Operator takeaway
- Track availability daily when liquidity is tight.
- Revolvers often have covenants tied to cash flow or leverage.
- Tie Revolving Credit to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
- Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.
Next decision
- Read Loan amortization: how monthly payments and total interest work if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
- Decide whether Revolving Credit belongs in cash planning, valuation, or debt monitoring so the number is used in the right model.
Where to use this on MetricKit
Guides
- Loan amortization: how monthly payments and total interest work: A practical guide to loan amortization: monthly payment formula, why interest dominates early, and how term and rate affect total interest.
- Runway and burn: gross vs net burn, working capital, and cash levers: A practical guide to runway: compute net burn, understand why cash differs from profit, and how working capital and collections change runway.