What is the characteristic of a revolver credit?

What is the characteristic of a revolver credit?

• A. It provides cash upfront
• B. It allows repeated borrowing up to a limit
• C. It is always secured by assets
• D. It requires full repayment at maturity

Answer: (B)

A revolver credit is characterized by its flexibility, allowing borrowers to draw funds up to a predetermined credit limit, repay those funds, and then borrow again as needed. This feature makes it particularly convenient for businesses or individuals who may have fluctuating cash flow needs. The ability to borrow repeatedly up to the limit is central to its function, distinguishing it from other forms of credit that may involve a single lump-sum disbursement or require immediate full repayment. For example, if a business has a revolver credit line of $500,000, it can withdraw $100,000, repay it, and then borrow another $200,000 without needing to reapply for credit every time. This revolving nature of the credit line gives the borrower immediate access to funds when needed, enhancing their financial flexibility and operational efficiency.

A revolver credit is characterized by its flexibility, allowing borrowers to draw funds up to a predetermined credit limit, repay those funds, and then borrow again as needed. This feature makes it particularly convenient for businesses or individuals who may have fluctuating cash flow needs. The ability to borrow repeatedly up to the limit is central to its function, distinguishing it from other forms of credit that may involve a single lump-sum disbursement or require immediate full repayment.

For example, if a business has a revolver credit line of $500,000, it can withdraw $100,000, repay it, and then borrow another $200,000 without needing to reapply for credit every time. This revolving nature of the credit line gives the borrower immediate access to funds when needed, enhancing their financial flexibility and operational efficiency.