VC & PE Glossary
What Is Revolver?
Updated
Definition
A revolver is a revolving credit facility — a loan line a company can draw, repay, and redraw within a limit, like a corporate credit card backed by a bank agreement.
Useful for: Founders, Investors
Revolver (revolving credit facility) is a committed loan line a borrower can tap repeatedly up to a maximum, repaying and re-borrowing during the facility term.
How it works
A bank commits $10M revolver for three years. You draw $3M for inventory, repay $2M after collections, draw $5M next quarter — outstanding balance never exceeds $10M without amendment.
Interest is paid on utilized amounts; unused lines often carry a commitment fee (e.g., 0.25–0.50% annually on undrawn capacity). Venture debt packages sometimes include a small revolver alongside term loans for working capital.
Covenants may require minimum cash, revenue milestones, or borrowing-base formulas tied to receivables. Breach can block new draws or accelerate repayment — read springing covenants that activate when cash drops below thresholds.
In LBOs, revolvers sit beside term debt and bonds as the liquidity layer for payroll spikes and bolt-ons.
Why it matters
- Founders: Treat revolvers as insurance, not permanent funding — utilization raises interest expense and can trigger investor scrutiny.
- Investors: Monitor covenant headroom; heavy revolver use near limits signals liquidity stress before runway models show it.
Common mistake
Assuming an undrawn revolver equals cash on hand. Banks can refuse draws or renegotiate if covenants fail or business performance deteriorates — commitment is conditional.
Related ideas
See also venture debt, capital call facility, cash flow, and event of default.
Related terms
- Capital Call Facility — A capital call facility is a credit line secured by LPs' uncalled commitments, letting a fund close investments quickly before issuing capital calls — the GP draws on the facility and later calls LPs to repay it.
- Venture Debt — Venture debt is a loan or credit facility for venture-backed companies — typically repaid over three to four years, often with warrants — used to extend runway or fund assets without immediate equity dilution.
Common questions
Short answers for founders, LPs, and operators