Revolving loan - Revision history

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	<onlyinclude>A '''revolving loan''' is a loan that continually renews for a period of time or until the agreement is ended by one party.</onlyinclude> The debtor is able to withdraw their funds at any time within the agreed amount of time. Similar to a credit card or overdraft account, the debtor can borrow the money, repay the amount and then withdraw again without having to agree to a new loan.<ref name=Ox_econ>"A Dictionary of Economics" published Oxford University Press, 2013. Edited by John Black, Nigar Hashimzade, and Gareth Myles Online version accessed [August 17th, 2017].</ref>		<onlyinclude>A '''revolving loan''' is a loan that continually renews for a period of time or until the agreement is ended by one party.</onlyinclude> The debtor is able to withdraw their funds at any time within the agreed amount of time. Similar to a credit card or overdraft account, the debtor can borrow the money, repay the amount and then withdraw again without having to agree to a new loan.<ref name=Ox_econ>"A Dictionary of Economics" published Oxford University Press, 2013. Edited by John Black, Nigar Hashimzade, and Gareth Myles Online version accessed [August 17th, 2017].</ref>

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	If a [[nuclear power]] firm wanted to expand and build new plants it could get a combination of a [[term loan]] (from a [[syndicated loan \| syndicate]]) and a [[revolving loan]]. Assume the planned expansion costs $5 billion, the firm could get a syndicated term loan for $3 billion and a revolving loan for the additional $2 billion.<ref>R. A. Brealey and S. C. Myers. ''Principles of Corporate Finance''. USA: Irwin McGraw-Hill, 2000, pp.709.</ref>		If a [[nuclear power]] firm wanted to expand and build new plants it could get a combination of a [[term loan]] (from a [[syndicated loan \| syndicate]]) and a [[revolving loan]]. Assume the planned expansion costs $5 billion, the firm could get a syndicated term loan for $3 billion and a revolving loan for the additional $2 billion.<ref>R. A. Brealey and S. C. Myers. ''Principles of Corporate Finance''. USA: Irwin McGraw-Hill, 2000, pp.709.</ref>

	==~~See Also~~==		==For Further Reading==
	*[[Loan]]		*[[Loan]]
			*[[Wealth]]
			*Or explore a [[Special:Random\|random page]]


	==References==		==References==
	{{reflist}}		{{reflist}}
			[[Category: Uploaded]]

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	<onlyinclude>A '''revolving loan''' is a loan that continually renews for a period of time or until the agreement is ended by one party.</onlyinclude> The debtor is able to withdraw their funds at any time within the agreed amount of time. Similar to a credit card or overdraft account, the debtor can borrow the money, repay the amount and then withdraw again without having to agree to a new loan.<ref>~~Investopedia.~~ "~~Revolving Loan Facility.~~" ~~[Online]~~, ~~Available: http://www~~.~~investopedia.com/terms/r/revolving-loan-facility.asp~~ [~~Aug 21~~, ~~2016~~].</ref>		<onlyinclude>A '''revolving loan''' is a loan that continually renews for a period of time or until the agreement is ended by one party.</onlyinclude> The debtor is able to withdraw their funds at any time within the agreed amount of time. Similar to a credit card or overdraft account, the debtor can borrow the money, repay the amount and then withdraw again without having to agree to a new loan.<ref name=Ox_econ>"A Dictionary of Economics" published Oxford University Press, 2013. Edited by John Black, Nigar Hashimzade, and Gareth Myles Online version accessed [August 17th, 2017].</ref>

	With a standard [[term loan]], once the money is repaid the loan contract is over and the debtor would have to create new loan to borrow more money. The revolving loan allows for this process to be bypassed, by doing so, money and time are saved. Often with term loans there is an '''origination fee''' at the beginning of the loan to pay for credit checks and other evaluations with a revolving loan, the fee is only paid once and the institution.<ref>Investopedia. "Origination Fee." [Online], Available: http://www.investopedia.com/terms/o/origination-fee.asp~~?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186~~ [Aug 21, 2016].</ref>		With a standard [[term loan]], once the money is repaid the loan contract is over and the debtor would have to create new loan to borrow more money. The revolving loan allows for this process to be bypassed, by doing so, money and time are saved. Often with term loans there is an '''origination fee''' at the beginning of the loan to pay for credit checks and other evaluations with a revolving loan, the fee is only paid once and the institution.<ref>Investopedia. "Origination Fee." [Online], Available: http://www.investopedia.com/terms/o/origination-fee.asp [Aug 21, 2016].</ref>

	==Line of Credit==		==Line of Credit==
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	There is a down side to using a revolving loan, there is typically a '''commitment fee''', a fee on the amount of money that is not used up to the limit. For example, assume a firm establishes a committed LoC of $800,000.00,it withdraws $700,000.00 leaving $100,000.00 unused. If the commitment fee is 0.6% then the fee paid would be:<ref>R. A. Brealey et al. ''Fundamentals of Corporate Finance''. Toronto: McGraw-Hill Ryerson, 2012, pp. 656.</ref>		There is a down side to using a revolving loan, there is typically a '''commitment fee''', a fee on the amount of money that is not used up to the limit. For example, assume a firm establishes a committed LoC of $800,000.00,it withdraws $700,000.00 leaving $100,000.00 unused. If the commitment fee is 0.6% then the fee paid would be:<ref>R. A. Brealey et al. ''Fundamentals of Corporate Finance''. Toronto: McGraw-Hill Ryerson, 2012, pp. 656.</ref>
	::::::::::<m>0.006 (100,000.00) = 600.00</m>		::::::::::<math>0.006 \times (100,000.00) = 600.00</math>

	==Combined Loans==		==Combined Loans==

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[[Category:Done 2016-04-30]]
<onlyinclude>A '''revolving loan''' is a loan that continually renews for a period of time or until the agreement is ended by one party.</onlyinclude> The debtor is able to withdraw their funds at any time within the agreed amount of time. Similar to a credit card or overdraft account, the debtor can borrow the money, repay the amount and then withdraw again without having to agree to a new loan.<ref>Investopedia. "Revolving Loan Facility." [Online], Available: http://www.investopedia.com/terms/r/revolving-loan-facility.asp [Aug 21, 2016].</ref>

With a standard [[term loan]], once the money is repaid the loan contract is over and the debtor would have to create new loan to borrow more money. The revolving loan allows for this process to be bypassed, by doing so, money and time are saved. Often with term loans there is an '''origination fee''' at the beginning of the loan to pay for credit checks and other evaluations with a revolving loan, the fee is only paid once and the institution.<ref>Investopedia. "Origination Fee." [Online], Available: http://www.investopedia.com/terms/o/origination-fee.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186 [Aug 21, 2016].</ref>

==Line of Credit==

A firm can establish a '''line of credit''' (LoC) with a financial institution whereby the firm can withdraw funds at their will with a certain limit. The LoC can be either '''committed''' or '''uncommitted'''.<ref name= Book1>J. Berk et al. ''Corporate Finance''. Toronto: Pearson Canada Inc., 2012, pp. 929.</ref>
*Committed LoC- There is a legal agreement that requires the financial institution to provide funds to the borrowing firm regardless of their financial situation or credit rating.
*Uncommitted LoC- the agreement is not legally binding and the financial institution can stop the flow of funds if the financial or credit position of the borrowing firm reached an undesirable level. Under this agreement, the firm is under lo obligation to continue lending past a point it deems to be risky.<ref name=Book1/>

Because these agreements are usually reviewed on an annual basis they are '''revolving'''.<ref>J.Black, N. Hashimzade, and G. Myles. (2009) "Revolving Loan." [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-2710?rskey=a73wa1&result=1, 2009 [Aug 20, 2016]</ref>

There is a down side to using a revolving loan, there is typically a '''commitment fee''', a fee on the amount of money that is not used up to the limit. For example, assume a firm establishes a committed LoC of $800,000.00,it withdraws $700,000.00 leaving $100,000.00 unused. If the commitment fee is 0.6% then the fee paid would be:<ref>R. A. Brealey et al. ''Fundamentals of Corporate Finance''. Toronto: McGraw-Hill Ryerson, 2012, pp. 656.</ref>
::::::::::<m>0.006 (100,000.00) = 600.00</m>

==Combined Loans==
If a [[nuclear power]] firm wanted to expand and build new plants it could get a combination of a [[term loan]] (from a [[syndicated loan | syndicate]]) and a [[revolving loan]]. Assume the planned expansion costs $5 billion, the firm could get a syndicated term loan for $3 billion and a revolving loan for the additional $2 billion.<ref>R. A. Brealey and S. C. Myers. ''Principles of Corporate Finance''. USA: Irwin McGraw-Hill, 2000, pp.709.</ref>

==See Also==
*[[Loan]]

==References==
{{reflist}}