What are Revolving Facilities?
Revolving facilities come up in Yieldstreet’s offerings and we thought it would be beneficial to shed some additional light on the concept for our investors.
Revolving credit facilities provide a rolling agreement that enables borrowers to have access to a flexible financing tool. Revolving is an apt title for this type of loan, since once an outstanding amount is paid down, the borrower can use the credit again. Think of it as a cycle that includes use of credit, repayment, and reuse.
This type of credit is particularly attractive for businesses that need to borrow funds as needed and that need a renewable credit source. Yieldstreet uses a type of revolving facility in some of our offerings, but unlike traditional revolving facilities, you’ll earn interest on the entire facility amount—not just what is utilized by the borrower.
Real World Applications of Revolving Facilities
When one thinks of a revolving facility, credit cards typically come to mind. Borrowers are provided a limit and can utilize the line of credit, and once repaid, can once again borrow more. The payments are based on the amount that is borrowed, and interest accrues on that amount. In the corporate world, revolving facilities are usually used to fund a company’s ongoing working capital needs as these needs vary based on such factors as the company’s growth rate and any seasonality in its product lines. Revolving facilities provide companies with financing certainty, while allowing companies to increase or decrease usage as business conditions dictate.
Short Term Notes
Another example is short term notes. Short term notes are very similar to revolving lines of credit but are granted for a term of one year or less, hence “short term.” In the corporate world, short term borrowings funded via the capital markets rather than through financial institutions are called commercial paper borrowings and generally have a term of 270 days or less.
Back in 2019, we launched a short-term note offering to investors, which provides prefunding for upcoming offerings before they launch on our platform.
Revolving Facilities Wrap-Up
At Yieldstreet, we’re always seeking ways for our investors to generate wealth, and this includes new opportunities and products. We are firm believers in this business model.
We are excited for an upcoming offering that involves revolving facilities and hope that you have found the information in this post helpful. If you have any questions or would like to learn more, please let us know by emailing [email protected]
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