Typically, these work by providing a funding limit based on a percentage of the value of the assets used to secure the loan facility. The facility limit will reduce each month, and, if structured properly, the reductions should be in line with the economic working life of the secured assets.

You can move funds in and out of the facility provided you remain under its limit. This means you can use this ‘spare’ cash in your business while paying less interest than you would with a comparable term loan. In essence, the money will be working harder for you.

This flexibility enables you to aggressively repay debt as cash flow allows, without stripping your working capital – if you make voluntary payments more than your required limit reductions, you should have access to withdraw that cash in the future if required.

This is hugely beneficial if your work is seasonal – cash is available in those months when you have less income, yet when the money is rolling in, you’re paying back debt and reducing your interest cost.

Another advantage of a revolver is that you can typically buy assets and add them to the facility with a minimal amount of paperwork. You can also sell assets and repay the debt with no interest penalties.

A revolver account gives excellent liquidity and better flexibility than a term loan, and if this is something you need, talk to your Finance New Zealand business partner today.