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Facility

Facility

What is a 'Facility'

A facility is a formal financial assistance program offered by a lending institution to help a company that requires operating capital. Types of facilities include overdraft services, deferred payment plans, lines of credit, revolving credit, term loans, letters of credit and swingline loans. A facility is essentially another name for a loan taken out by a company.

Explaining 'Facility'

A facility is an agreement between a corporation and a public or private lender used for short-term borrowing. The loan is for a set amount and does not require collateral. The borrower makes monthly or quarterly payments, with interest, until the debt is paid in full. A facility is especially important for companies that want to avoid things such as laying off workers, slowing growth, or closing down during seasonal sales cycles when revenue is low. For example, if a jewelry store is low on cash in December, when sales are down, the owner can request a $2 million facility from a bank, which is paid back in July when business is booming. The jeweler uses the funds to continue operations, and pays back the loan in monthly installments by the agreed-upon date.

Overdraft Services

Overdraft services provide a loan to a company when its cash account is empty. The lender charges interest and fees on the borrowed money. Overdraft services cost less than loans, are quickly completed, and do not include penalties for an early payoff.

Business Lines of Credit

An unsecured business line of credit gives corporations access to cash as needed at a competitive rate, with flexible payment choices. A traditional line of credit provides check-writing privileges, requires an annual review, and can be called early by the lender. A non-traditional line of credit provides business credit cards with quick access to cash and a high credit limit. Revolving credit has a specific limit and no set monthly payments, yet interest accrues and is capitalized.

Term Loans

A term loan is a commercial loan with a set interest rate and maturity date. A company typically uses the money to finance a large company investment or acquisition. Intermediate-term loans are under three years and are repaid monthly, possibly with balloon payments. Long-term loans can be up to 20 years and are backed by collateral.

Letters of Credit

Domestic and international trade companies use a letter of credit to facilitate transactions and payments. A financial institution assures payment and completion of obligations between the applicant, or buyer, and the beneficiary, or seller.


Further Reading

Consumption Facility Model and Provincial Consumption Facility Indexes [J]Consumption Facility Model and Provincial Consumption Facility Indexes [J]
en.cnki.com.cn [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …

Essential facility financing and market structureEssential facility financing and market structure
www.sciencedirect.com [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …

Economic Adjustment in Low-Income Countries; Experience Under the Enhanced Structural Adjustment FacilityEconomic Adjustment in Low-Income Countries; Experience Under the Enhanced Structural Adjustment Facility
ideas.repec.org [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …

Facility finance: measurement, trends, and analysis.Facility finance: measurement, trends, and analysis.
www.cabdirect.org [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …

Financing and economics of nuclear facility decommissioningFinancing and economics of nuclear facility decommissioning
www.sciencedirect.com [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …

The federal reserve's primary dealer credit facilityThe federal reserve's primary dealer credit facility
papers.ssrn.com [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …

The term securities lending facility: origin, design, and effectsThe term securities lending facility: origin, design, and effects
papers.ssrn.com [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …

Repo market effects of the term securities lending facilityRepo market effects of the term securities lending facility
pubs.aeaweb.org [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …

Health-care facility choice and the phenomenon of bypassingHealth-care facility choice and the phenomenon of bypassing
academic.oup.com [PDF]
… Based on the empirical estimates, we establish a Provincial Consumption Facility Index to rate the conditions of consumption facilities in China's provinces … 10, ZHOU Haowen,PAN Chaoshun (Institute of Economics and Finance, Xi' an Jiaotong University, Shanxi 710661 …


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