Credit Facility

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DEFINITION of 'Credit Facility'

A type of loan made in a business or corporate finance context. Specific types of credit facilities are: revolving credit, term loans, committed facilities, letters of credit and most retail credit accounts.

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BREAKING DOWN 'Credit Facility'

Companies frequently implement a credit facility in conjunction with closing a round of equity financing (raising money by selling shares of its stock). A key consideration for any company is how it will incorporate debt in its capital structure, at the same time it must consider the parameters of its equity financing. The company must look at its capital structure as a whole, determining how much capital it needs immediately and over time, and the combination of equity and debt that it will use to fulfill those requirements.

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