Revolving Facility: A Guide for South African Entrepreneurs

In 2026, South African entrepreneurs are operating in a tough environment: slow economic growth, delayed customer payments, tighter lending rules, and rising operating costs. As a result, many viable businesses are not failing because they are unprofitable — they are failing because of cash-flow timing problems.

This is where revolving facilities come in. More banks and alternative lenders are pushing revolving facilities as a flexible form of working capital, but many entrepreneurs still misunderstand how they work, what they cost, and when they should be used.

This guide explains revolving facilities clearly, practically, and in the context of South African SMEs today — not generic finance theory.

What a Revolving Facility Actually Is

A revolving facility is a pre-approved credit limit that a business can access repeatedly over time. The key feature is that the facility revolves: when you repay what you have used, that amount becomes available again without reapplying.

Important points:

• You are approved for a limit, not a lump sum

• You draw funds only when needed

• You repay based on cash flow

• You can reuse the facility during the agreed period

In South Africa, revolving facilities are commonly structured as overdrafts, working-capital lines, or revolving credit agreements.

How a Revolving Facility Works in Real Business Terms

Once approved, the lender gives your business access to a maximum amount of credit.

For example:

• Your business is approved for a revolving facility of R250,000

• You draw R90,000 to pay suppliers

• Interest is charged only on the R90,000 used

• When you repay R40,000, your available credit increases again

This cycle can continue as long as the facility remains active and compliant.

Why Revolving Facilities Are Different From Other Funding

Unlike traditional business loans, revolving facilities are designed for short-term, repeat needs, not once-off expenses.

Key differences:

• You do not receive all the money upfront

• There is no fixed drawdown schedule

• Repayments are flexible

• Borrowing adjusts to your business cash-flow cycle

This makes revolving facilities especially useful for businesses with uneven or seasonal income.

Common Uses of Revolving Facilities in South Africa

In 2026, South African SMEs typically use revolving facilities for:

• Paying suppliers while waiting for customer payments

• Managing monthly payroll when income is delayed

• Buying stock ahead of peak seasons

• Covering short-term operational gaps

They are not meant for long-term assets such as vehicles, machinery, or property.

The Cost Structure You Need to Understand

One of the biggest mistakes entrepreneurs make is focusing only on the interest rate.

A revolving facility may include:

• Interest on the amount used

• Monthly or annual facility fees

• Commitment fees on unused portions

• Administration or service fees

Even if you do not draw funds, some costs may still apply. In 2026, lenders are more transparent, but it is still your responsibility to ask for a full cost breakdown.

Risks That South African SMEs Must Watch Out For

Revolving facilities can quietly become dangerous if misused.

Common risks include:

• Treating the facility as permanent income

• Never fully repaying the balance

• Relying on credit instead of fixing cash-flow problems

• Being exposed to interest rate increases

Many businesses only realise the risk when the bank reduces or cancels the facility during a review.

How Lenders Assess Revolving Facility Applications in 2026

South African lenders focus less on ideas and more on behaviour and consistency.

They typically assess:

• Business bank statements (cash-flow patterns)

• Turnover consistency

• SARS tax compliance status

• CIPC registration

• Director credit profile

• The time the business has been operating

A smaller but stable business often has a better chance than a larger but volatile one.

What Documents You Should Prepare Before Applying

To improve approval chances, have the following ready:

• Company registration documents

• Recent business bank statements

• SARS compliance confirmation

• Cash-flow forecast

• Basic financial records or management accounts

Being prepared signals lower risk to the lender.

When a Revolving Facility Makes Strategic Sense

A revolving facility is a good option if:

• Your business has predictable cash inflows

• Customers pay on delayed terms

• You need flexibility, not a lump sum

• You can plan repayments responsibly

Used correctly, it smooths operations without locking you into long-term debt.

When a Revolving Facility Is the Wrong Tool

You should avoid revolving credit if:

• The business is consistently losing money

• Credit is being used to survive month-to-month

• There is no clear repayment plan

• Long-term assets are being funded by short-term

In these cases, restructuring, equity, or different funding options are more appropriate.

Best Practices for Using a Revolving Facility Wisely

Successful SMEs follow these rules:

• Use the facility intentionally, not automatically

• Repay as soon as cash is received

• Keep usage well below the maximum limit

• Review costs and usage regularly

Discipline matters more than limit size.

A Tool for Stability, Not Growth on Its Own

In 2026, revolving facilities remain one of the most useful working-capital tools available to South African entrepreneurs — but they are not growth capital on their own.

They work best when:

• The business already has customers

• Cash-flow timing is the main issue

• Management understands the true cost of credit

When used correctly, a revolving facility increases stability and control. When misunderstood, it quietly increases risk.