Strategic Liquidity: What’s the Difference Between a Credit Facility and a Loan?
For corporate treasurers and executives, understanding the distinction between a Credit Facility and a traditional Term Loan is critical for efficient Corporate Liquidity and Capital Access. The difference is less about the terminology and more about the structure, flexibility, and ultimate cost.
At IntaCapital Swiss, we clarify that the core difference is how and when you access the agreed-upon capital.
The Fundamental Difference: Structure and Access
While both involve borrowing money and repaying it with interest, they are designed to serve fundamentally different strategic purposes.
| Feature | Credit Facility (e.g., Revolver) | Term Loan (e.g., Fixed-Term Corporate Loan) |
| Structure | Revolving (Reusable) or Non-Revolving (One-off) | Non-Revolving (One-off Lump Sum) |
| Access | Funds are drawn down as needed, up to a limit. | Full lump sum is disbursed upfront. |
| Interest | Charged only on the amount drawn down (the outstanding balance). | Charged on the entire principal amount from day one. |
| Fees Nuance | Commitment fees may apply to the undrawn portion. | No fee is applied to the undrawn portion. |
| Repayment | Flexible: Principal and interest are paid down, and the credit line replenishes. | Fixed: Repaid over a set schedule (amortisation) until maturity. |
| Best For | Working capital, seasonal fluctuations, and managing gaps in Corporate Liquidity. | Asset acquisition, business expansion, and fixed Capital Access projects. |
The key takeaway is flexibility vs. predictability. A Credit Facility is an agreement that allows access to future loans, while a Term Loan is the immediate disbursement of funds.
Collateral Transfer and Liquidity Services
Both a Credit Facility and a Term Loan can be structured as Secured Debt, meaning collateral is required to mitigate the lender’s risk. This need for security is often the biggest hurdle for corporations seeking significant Capital Access.
1. Securing Term Loans
For high-value, fixed-term projects (like infrastructure or acquisitions), a Term Loan is often secured by the asset being purchased or by the borrower’s existing assets. When companies lack sufficient unencumbered security, the loan may be denied or granted only with prohibitive terms.
2. Securing Credit Facilities
Revolving Credit Facilities are vital for managing Corporate Liquidity. They are also frequently secured, as the flexible nature of the drawdowns makes the Secured Debt harder for lenders to track. Strong security is often a prerequisite for a substantial revolving limit.
Our Solution for Capital Access
Through the Collateral Transfer Facility, IntaCapital Swiss provides high-grade security (often a Bank Guarantee or SBLC) which can be used to secure both types of borrowing:
- Term Loans: Obtain favourable, long-term Capital Access for fixed projects by mitigating risk with institutional security.
- Credit Facilities: Secure the large Revolving Credit limits necessary for managing complex Corporate Liquidity needs and unexpected expenses.
We specialise in arranging the external security required to access bespoke Credit Facilities and Term Loans, ensuring your liquidity strategy is both flexible and robust.
Take the Strategic Next Step
Choosing the right structure—a flexible Revolving Credit facility or a predictable Term Loan—is the cornerstone of successful corporate strategy.
Don’t let rigid financing structures limit your growth. Speak to us about securing your project’s funding efficiently.
Contact our experts today and unlock the specific, strategic liquidity your corporation needs to thrive.
