Financial management : Question 2
I often hear the term Revolving Credit, but I don’t know what it means. Could you shed some light on this matter, as it causes me problems when I’m trying to solve financial problems.

A revolving loan is a line of credit which can be used in successive, renewable drawdowns.

For example, you can use a credit card to buy an oven in a department store, not pay for it immediately, but pay it off in full when you get the money, and then make a second drawdown to buy a washing machine that you’ll pay for later. This credit obviously is not free.

Companies usually make spot drawdowns over periods varying from between one and 12 months. There are also medium term drawdowns that can be used in successive drawdowns.

For more, cheek out chapter 22 of the Vernimmen.