A facility is a structured financial assistance program provided by a lending institution to support a business in need of operational cash. Overdraft services, deferred payment plans, lines of credit (LOC), revolving credit, letters of credit, Trust Receipt, Bank Guarantee, and check discounting are examples of facilities.  A facility is just another word for a loan taken out by a business.

How a Corporate Facility Works

 

A facility is an arrangement between a corporation and a public or private lender that permits the company to borrow a specific amount of money for various reasons for a limited time. The loan is for a fixed sum and does not need security. The borrower pays monthly or quarterly payments with interest until the loan is paid in full.

 

A facility is especially crucial for businesses that wish to prevent problems like layoffs, halting growth, or closing down during seasonal sales cycles when income is low.

 

Remember that when you borrow money, you are not simply repaying the initial debt. Except for the 0% credit card, which is paid off on time, you must pay interest or "rent" on the money you borrow. There's no reason to pay interest on the money you don't need, so only borrow what you really have to. If you borrow less than you need, you may be compelled to turn to more costly loan sources at the last minute.

 

Finally, be certain that you can afford the payments on the amount borrowed. Nothing is worse than overextending yourself financially when the smartest thing to do would have been to wait till your circumstances improved.