Revolving Credit Facility Rates September 2026 — RCF vs Overdraft vs Business Loan
- RCF effective rate — base (3.75%) + margin 2.5%–5.5% (September 2026)
- 6.25%–9.25%RCF effective rate — base (3.75%) + margin 2.5%–5.5% (September 2026)
- Only the drawn balance carries interest — not the full facility limit
- Interest on drawnOnly the drawn balance carries interest — not the full facility limit
- Commitment fee on undrawn balance — often overlooked in cost comparison
- 1%–2% p.a.Commitment fee on undrawn balance — often overlooked in cost comparison
- RCF facilities typically reviewed annually — lender can withdraw or restrike
- Annual reviewRCF facilities typically reviewed annually — lender can withdraw or restrike
Revolving credit facility (RCF) rates in September 2026 are quoted as a margin over the Bank of England base rate — typically base + 2.5%–5.5%, giving effective rates of approximately 6.25%–9.25% at the current base rate of 3.75%. Unlike a term loan (fixed amount, fixed repayment schedule), an RCF allows the business to draw and repay repeatedly up to an agreed limit — paying interest only on the drawn balance. This flexibility makes RCFs highly cost-effective for businesses with variable funding needs, but the commitment fee on the undrawn portion adds to the true cost.
RCF vs Overdraft vs Business Loan — September 2026 Comparison
Swipe the table sideways to see every column.
| Product | Rate basis | Effective rate | Commitment fee | Best for | Named lenders |
|---|---|---|---|---|---|
| RCF (secured on property) | Base + 2.5%–4.0% | 6.25%–7.75% | 0.5%–1.5% p.a. on undrawn | Medium-term flexible borrowing, seasonal businesses | HSBC, Barclays, NatWest, specialist lenders |
| RCF (unsecured, strong covenant) | Base + 3.5%–5.5% | 7.25%–9.25% | 1.0%–2.0% p.a. on undrawn | SMEs without property security, established businesses | Barclays, Lloyds, specialist challenger banks |
| Overdraft (traditional bank) | Base + 3.0%–7.0% | 6.75%–10.75% | Unused facility fee varies | Short-term working capital dips, existing banking relationship | HSBC, Barclays, NatWest, Lloyds, TSB |
| Term business loan (secured) | Fixed 6.5%–9.5% | 6.5%–9.5% | None — full drawdown | Specific investment or capital project with known repayment | Multiple — see Business Loan Rates guide |
| Invoice finance (factoring) | Service charge + discount rate | 10%–25% annualised | Minimum usage fee possible | Businesses with B2B invoices, funding the debtor book | Barclays Asset Finance, Close Brothers, Bibby |
What determines your rate
The true cost of an RCF — rate plus commitment fee
An RCF at 7.5% on a £500,000 facility where only £200,000 is drawn incurs: £15,000/year interest on the drawn balance + commitment fee of 1.25% on the undrawn £300,000 = £3,750/year. Total annual cost: £18,750 = effective rate of 3.75% on the total facility (or 9.375% on the drawn balance). For businesses using the full facility, the commitment fee is minimal. For businesses using a small percentage of their facility, the commitment fee materially increases the effective cost. DBF models the utilisation-adjusted cost for each RCF enquiry.
RCF vs overdraft — why an RCF is often better
Bank overdrafts are technically repayable on demand — the bank can withdraw the facility without notice in extreme circumstances. RCFs have a committed facility for an agreed period (typically 1–3 years) — the bank cannot withdraw during this period except for covenant breach. For businesses relying on revolving credit for working capital, a committed RCF provides significantly more certainty than an overdraft. The rate is broadly similar; the certainty is substantially better.
Annual review risk
Most RCFs are reviewed annually. At each review, the lender can: maintain the facility, reduce the limit, increase the rate, or (in extreme cases) decline to renew. A business that becomes over-dependent on an RCF faces risk at each review cycle. DBF advises businesses to maintain RCFs as a supplement to, rather than a replacement for, adequate working capital and equity.
Security and covenant requirements
Secured RCFs (property charge): lower margin, higher facility limits, longer committed period. Unsecured RCFs: higher margin, typically based on balance sheet strength and trading history. Covenants (financial ratios — typically interest cover and leverage) are standard in RCFs above £500,000. Covenant breach can trigger a review and potential withdrawal of the facility. DBF advises on which covenants are typical for the business's profile and how to manage covenant compliance.
Worked cost example
- Owns commercial unit
- £480,000 (no mortgage)
- Rest of year
- £0–£100,000 typical usage
Seasonal retail business. Peak inventory demand: September–November (£300,000 stock purchase).
Slow period: January–March. Annual turnover: £2.8m. 8 years trading. Clean credit.
RCF arranged: £400,000 secured on commercial unit. Rate: base + 3.2% = 6.95%. Commitment fee: 1.0% on undrawn.
Usage pattern
September–November: draw £350,000. Interest: 6.95% on £350,000 for 3 months = £6,081.
Commitment fee on undrawn £50,000 for 3 months = £125.
January–March: repaid £280,000. Draw £70,000. Interest: 6.95% × £70,000 × 3 months = £1,216.
Annual total interest: approximately £12,500. Commitment fee (full year): £1,000.
Total annual RCF cost: £13,500 on peak £350,000 usage = 3.9% of peak draw.
Overdraft alternative: same bank, 8.5% on £350,000 for same periods = £14,875. Higher.
Term loan alternative: fixed £350,000 over 3 years at 7.5% = £26,250/year interest. Significant overpayment for seasonal need.
RCF is optimal for this seasonal business — interest only on what is drawn.
Rate context and outlook
The Bank of England held its base rate at 3.75% on 30 July 2026 in a divided 6-3 vote. Next decision: 17 September 2026. DBF arranges revolving credit facilities for SMEs across a range of sectors — retail, wholesale, manufacturing, and professional services. Secured RCFs with property charge are our most common structure; we also access unsecured RCFs for businesses with strong balance sheets. DBF advises on the optimal facility limit, commitment fee structure, and covenant thresholds for each business.
Frequently asked questions
What are revolving credit facility rates in September 2026?
RCF rates are quoted as a margin over the BoE base rate. With the base rate at 3.75%, effective RCF rates range from 6.25%–7.75% for secured facilities (property charge) and 7.25%–9.25% for unsecured facilities. Add the commitment fee (0.5%–2.0% p.a. on the undrawn balance) to calculate the full cost.
Is an RCF the same as an overdraft?
Both provide flexible access to credit repayable and redrawable within a limit. Key differences: an overdraft is technically repayable on demand; an RCF is committed for an agreed period (typically 1–3 years). RCF rates and overdraft rates are broadly similar, but the RCF provides greater certainty of availability. For businesses relying on revolving credit for working capital, an RCF is significantly more reliable than an overdraft.
What is a commitment fee on an RCF?
A fee charged on the undrawn portion of the RCF — typically 0.5%–2.0% p.a. on the facility limit minus the drawn amount. If your £500,000 RCF has £300,000 drawn and a 1.25% commitment fee, you pay 1.25% × £200,000 = £2,500/year on the undrawn balance. This increases the effective cost for businesses that maintain large undrawn facilities.
Can a small business get a revolving credit facility?
Yes — though smaller facilities (under £100,000) are often structured as overdrafts rather than formal RCFs. Formal RCFs are most common for facilities of £100,000+. Requirements: typically 2+ years trading, positive financial history, and either property security or strong balance sheet. DBF accesses RCFs for SMEs from £100,000 to £10m+.
How long does it take to arrange an RCF?
Secured RCFs with property charge: 3–6 weeks (includes valuation and legal work). Unsecured RCFs (strong covenant): 2–4 weeks. The process involves credit assessment, facility documentation, and (for secured facilities) property valuation and legal charge. DBF manages the full process and advises on documentation requirements at the start of every RCF enquiry.
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Independent whole-of-market advice · FCA No. 814533