Credit Facility

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Shared National Credit Program

    A program formed in 1977 to provide an efficient and consistent ...
  2. Authorized Settlement Agent

    A bank that is authorized to submit checks and other cash items ...
  3. Syndicate

    A professional financial services group formed temporarily for ...
  4. Credit Sleeve

    A form of credit agreement, backed by physical assets, where ...
  5. Standby Letter of Credit - SLOC

    A guarantee of payment issued by a bank on behalf of a client ...
  6. Syndicated Loan

    A loan offered by a group of lenders (called a syndicate) who ...
RELATED FAQS
  1. What are the advantages of using an effective interest rate figure?

    The primary advantage of using the effective interest rate figure is simply that it is a more accurate figure of actual interest ... Read Full Answer >>
  2. How is the risk-free rate of interest used to calculate other types of interest rates ...

    The risk-free rate for bonds is used for pricing the yield spread as the difference between the interest rate on a bond and ... Read Full Answer >>
  3. Which factors most influence fixed income securities?

    The main factors that impact the prices of fixed income securities include interest rate changes, default or credit risk, ... Read Full Answer >>
  4. Is the market risk premium the same for stocks and bonds?

    Stocks and bonds carry investment risk. Buyers demand a premium return or a discounted cost from sellers or issuers in exchange ... Read Full Answer >>
  5. What are some safe fixed-income investments?

    For the majority of younger investors, taking on risk within a portfolio in return for higher returns is the norm. Because ... Read Full Answer >>
  6. How important is credit rating on a fixed income security?

    The credit rating on a fixed income security is an important factor for the determination of the yield and the amount of ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  3. Bonds & Fixed Income

    Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.
  4. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  5. Bonds & Fixed Income

    Understanding Negative Rates Of Europe's Central Banks

    We are currently seeing negative central bank deposit rates and government and corporate bonds with negative yields, but there are investors buying into these securities. Why?
  6. Mutual Funds & ETFs

    Is HYG a Smart High Yield Corporate Bond Play?

    High yield is in high demand, but whether or not you should invest in iShares HYG ETF will depend heavily on your risk appetite.
  7. Bonds & Fixed Income

    Should Junk Bond ETFs Be a Part of Your Portfolio?

    Should junk bonds be a part of your portfolio? Here's what you need to know.
  8. Professionals

    Is Now the Time for Junk Bonds?

    A bet on high-yield bonds is a bet that the global economy will continue to improve...but not too much.
  9. Bonds & Fixed Income

    Unconstrained Investing: What It Is … And What It Isn’t

    “Unconstrained investing” is a term that is bandied about frequently—and is an investment approach that can often be misunderstood.
  10. Bonds & Fixed Income

    Why Companies Issue Bonds

    When companies need to raise money, issuing bonds is one way to do it. A bond functions like a loan between an investor and a corporation.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center