Standard financing products don't always fit. Your business has unique cycles, specific customer bases, and particular working capital patterns.
Custom revolving finance structures are designed around your business, not the other way around.
This guide explains what revolving facilities are, how they can be customized, and when they make sense for your business.
What Is Revolving Finance?
Revolving finance is a credit facility that you can draw from, repay, and draw from again. Think of it like a credit card for your business, but with structures designed for commercial use.
Unlike a term loan where you receive a lump sum and pay it back over time, revolving facilities flex with your needs. You only pay interest on what you use.
The "custom" part means the facility is structured specifically for your business. The limit, pricing, security, and repayment triggers are all designed around how your business actually operates.
How It Differs from Standard Overdrafts
Standard Bank Overdraft
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Generic terms for all businesses
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Usually requires property security
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Annual review and potential reduction
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Limited flexibility on limit increases
Custom Revolving Facility
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Structured around your specific business
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Security based on business assets
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Dynamic limits based on trading
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Grows as your business grows
How Customization Works
The customization process starts with understanding your business. We look at your sales cycles, customer payment patterns, seasonal variations, and growth plans.
From there, we structure a facility that matches your reality.
Limit Structure
Your facility limit can be fixed, or it can fluctuate based on your receivables, inventory, or confirmed orders. A dynamic limit means more funding when you need it most.
Security Package
We work with what you have. This might be receivables, inventory, equipment, contracts, or a combination. The goal is to unlock value from assets already in your business.
Pricing Model
Pricing can be tied to utilization, prime rate, or fixed for predictability. We structure this based on your cash flow patterns and risk tolerance.
Repayment Triggers
Instead of fixed monthly payments, repayment can be triggered by collections, sales, or other business events that naturally generate cash.
A Practical Example
Business: Furniture manufacturer supplying retailers
Challenge:Raw material purchases happen monthly, but customer payments vary. Bank overdraft of R500,000 wasn't enough during peak production months.
Custom solution:
- • Base facility: R1 million
- • Dynamic component: Up to 70% of confirmed orders
- • Security: General notarial bond over inventory and cession of receivables
- • Repayment: Automatic sweep when customer payments arrive
In practice: When the business received a R2 million order from a retailer, the facility automatically increased to accommodate production costs. When the retailer paid, the facility reduced accordingly.
Result: The business could take on larger orders without worrying about working capital constraints.
Common Custom Structures
Receivables-Based Revolving
Limit fluctuates based on your outstanding invoices. More sales mean more availability. Ideal for businesses with strong corporate customers.
Inventory-Based Revolving
Borrowing base calculated on inventory levels. Works well for distributors and manufacturers with valuable stock.
Contract-Based Revolving
Facility tied to confirmed contracts or purchase orders. Perfect for project-based businesses with lumpy cash flows.
Seasonal Revolving
Higher limits during peak season, lower during off-season. Matches your actual working capital cycle.
The Cost Structure
Custom revolving facilities typically have two cost components:
Availability Fee
A small percentage on your total facility limit. This reserves capacity for you whether you use it or not. Typically 0.5-1.5% per annum.
Utilization Interest
Interest on what you actually draw. Usually prime + a margin based on your risk profile. You only pay this on amounts used.
The combined cost is often competitive with or lower than standard overdrafts, especially when you factor in the flexibility and higher limits custom structures provide.
Who This Works For
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Businesses outgrowing their current bank facilities
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Companies with seasonal or cyclical working capital needs
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SMEs with strong receivables or inventory but limited property security
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Businesses taking on larger contracts and needing flexible capacity
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Companies seeking facilities that grow with their business
Getting Started
Structuring a custom revolving facility requires understanding your business deeply. The process typically involves:
Initial consultation to understand your business model and working capital needs
Analysis of your financial statements, receivables aging, and inventory patterns
Structure design with proposed limits, pricing, and security
Funder matching to find the best fit for your structure
Documentation and implementation
Ready to Explore Custom Revolving Finance?
At Digital Equity Management, we specialize in structuring working capital solutions that fit your business. Let's discuss your needs and design a facility that works for you.
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