CFA Level I · CFA Level I Exam · Fixed-Income Markets for Corporate Issuers
A corporate borrower wants a bank facility that lets it draw funds, repay them and draw again up to a set limit over several years, mainly to cover seasonal working capital needs. The facility that best fits this description is a:
A revolving credit facility best fits. It allows the borrower to draw, repay and redraw up to a committed limit, which suits seasonal working capital needs. A term loan is funded once and repaid on a schedule, and a bridge loan is temporary financing.
- Aterm loan.
- Brevolving credit facility.Correct
- Cbridge loan with a single bullet repayment.
Explanation
A revolving credit facility permits repeated borrowing and repayment up to a committed limit, which suits fluctuating working capital needs. A term loan is drawn once and repaid on a schedule, and a bridge loan is short-term financing until permanent funding arrives.
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