Credit Facility

Posted in Finance, Accounting and Economics Terms, Total Reads: 454

Definition: Credit Facility

It is a type of loan which is taken by corporates. The loan can be of many forms like committed facilities, term loans, letters of credit, revolving credit etc.

This is implemented by companies generally when a round of equity financing is closed. Any company determines its capital structure on the basis of amount of debt and equity. The amount of debt and equity is decided on the basis of how much capital the company will need immediately and long term basis. The credit facility helps a company to generate capital in an extended time frame.

For example:

In 2011, a petroleum company Abraxas closed a deal with lender Societe Geenerale on Credit Facility. Though the total amount was $300 million bot only up to $125 million was allowed to withdraw. The amount has to be repaid within four years with a variable interest rate of 2-3%.



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