How businesses use revolving credit to prepare for Black Friday sales

Black Friday’s one of the biggest sales opportunities of the year. But for many businesses, the run-up to it can prove financially challenging. You may need to buy stock, hire seasonal staff, and cover higher energy bills – all before a single sale comes in.

This is where a revolving credit facility could help. Unlike a fixed-term business loan, it gives you the flexibility to borrow what you need, when you need it. And you’ll only pay interest on the amount you use. So you can stock up for the rush without draining your working capital.

In this article, we’ll explain how revolving credit works, when it makes sense to use it, and how to avoid common pitfalls.

Key points:

• Black Friday can squeeze cash flow as you spend on stock and marketing before sales revenue arrives

• A revolving credit facility can help bridge the gap between spending and earning by giving you fast, flexible access to funds

• Funding Options by Tide can help when optimisation of working capital isn’t enough, offering access to business finance up to £20 million

What is a revolving credit facility?

A revolving credit facility is a bit like a business credit card, but it offers more flexibility and often better terms. It’s a pre-approved credit line that lets you draw funds as needed, repay them, and borrow again without reapplying. Like a credit card, you only pay interest on what you use, not the entire limit.

For example, imagine you’ve got a £50,000 revolving credit facility. You draw £20,000 in November to buy extra stock for Black Friday. You repay it in January, once sales revenue comes in. Then, if you need another £10,000 for a last-minute marketing push, you can draw it again without having to re-apply.

This makes it a suitable solution for businesses with unpredictable cash flow or seasonal demand. Unlike a term loan, where you’re locked into fixed repayments, a revolving credit facility adapts to your needs. And because you’re not tying up cash in advance, you can keep your working capital healthy for other opportunities.

In addition to the flexibility it provides, many businesses use it because it’s faster than traditional loans – you can often access funds in 24-48 hours. And since you’re only charged interest on what you borrow, it can be more cost-effective than an overdraft or credit card for larger amounts.

How revolving credit could help your business prepare for Black Friday

A revolving credit facility is more than a safety net. It can be used strategically to finance expenses and investment in growth. Here’s how businesses use it to make the most of Black Friday:

• Stocking up without straining cash flow: Black Friday shoppers expect deals, and that means you need inventory ready to go. But buying stock in bulk can tie up cash you might not have. With a revolving credit facility, you can draw funds to buy inventory in October or November, then repay once sales start rolling in.

• Funding marketing campaigns: The costs of running social media ads, email campaigns, or in-store promotions add up. A revolving credit facility lets you invest in high-impact campaigns without draining your working capital. And because you can reuse the funds, you’re not stuck with a lump-sum loan if plans change.

• Covering VAT and supplier bills: Even with strong sales, keeping your cash flow steady can be tricky. A revolving credit facility gives you the liquidity to cover the immediate costs of VAT payments, supplier invoices, and other bills so you’re not caught off guard.

• Bridging the gap between spending and sales: When you’re spending money now for revenue that won’t arrive until later, a revolving credit facility can smooth out that lag. So you may avoid needing to dip into cash reserves or take on more expensive short-term debt.

The pros and cons of using revolving credit for Black Friday

Like all financial products, a revolving credit facility has its upsides and downsides. So you’ll want to consider the risks as well as the benefits before committing.

Advantages of using revolving credit

• Flexibility: Borrow what you need, when you need it, without lump-sum commitments

• Speed: Access funds in as little as 24-48 hours

• Cost-effective for short-term use: Pay interest only on what you use, not the full limit

• Reusable: Once repaid, you can borrow again (great for businesses with multiple peak seasons)

Considerations when using revolving credit

• Variable interest rates: Rates can be higher than term loans, particularly if you need to improve a poor credit score

• Risk of over-borrowing: It’s easy to draw more than you can repay if sales slow down

• Not ideal for long-term needs: It’s better for short-term gaps, not major investments like equipment or expansion

If you’re confident in your Black Friday sales forecast, a revolving credit facility could be a game-changer. But if you’re unsure, it’s worth having a backup plan – like combining it with trade credit or invoice finance.

Tips for using revolving credit this Black Friday

A revolving credit facility is a powerful tool – but only if you use it wisely. Here’s how to make the most of it:

• Borrow conservatively: It may be tempting to use the full limit, but try to stick to what you know you can repay. Your sales forecasts can guide how much you borrow. If you’re unsure, start small – you can always withdraw more later.

• Prioritise high-ROI spends: Not all Black Friday expenses are equal. So focus on what could drive the most sales (e.g. bestselling stock or targeted ads). Try avoiding using the funds for non-essentials that won’t boost revenue.

• Plan your repayment timeline: Aim to repay what you borrow by January, when post-holiday sales revenue comes in. This should keep interest costs low and avoid added cash flow pressure in the new year.

• Compare lenders: Not all revolving credit facilities are created equal. So consider using tools like Funding Options’ Revolving Credit Facilities Calculator to compare rates, fees, and repayment terms.

• Combine with other finance: A revolving credit facility can work well as part of a wider strategy. So you could pair it with trade credit for supplier payments or invoice finance to free up cash tied in unpaid invoices.

Alternatives to revolving credit

A revolving credit facility isn’t the only way to fund your Black Friday season. Here are other options to consider:

• Business loans: Suitable for planned, long-term investments (like equipment or expansion). You’ll get a fixed amount upfront and repay over months or years. But you’ll have less flexibility if your needs change.

• Invoice finance: If late-paying customers are your biggest challenge, invoice finance lets you unlock cash from unpaid invoices. You’ll get a percentage of the invoice value upfront, then repay once your customer pays.

• Merchant cash advance: This could be a good fit if your business takes a lot of card payments. Repayments are tied to your card sales, so they flex with your revenue. But look out for higher fees compared to other options.

• Overdrafts: Quick and easy for short-term needs, but interest rates can be high. Typically better for emergencies rather than planned spending.

• Business credit cards: Great for smaller, regular expenses (e.g. marketing or travel). But with interest rates often 18-36%, they’re suitable if you can clear the balance each month.

• Trade credit: Some suppliers offer extended payment terms (e.g. 60 or 90 days), which can ease cash flow pressure. But it’s not available to everyone.

Find business finance with Funding Options by Tide

Whether you’re looking for a standard business loan, a short-term business loan, or something a little more specialist, like auction finance for property developers, we’re one of the leading names in business finance in the UK, having helped facilitate over £1 billion in finance to more than 20,000 customers.

Checking if you’re eligible is free, only takes a few minutes, and while a full application would impact your personal or business credit score, checking eligibility won’t. Just submit your details via the link below to find out if you could be eligible to borrow up to £20 million.

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FAQs

Is revolving credit accessible for startups?

Yes, but you’ll typically need at least 6-12 months of trading history. Some lenders may also ask for a personal guarantee if your business is newer.

How does revolving credit affect my balance sheet?

It’s recorded as a liability. The interest is usually tax-deductible, but it’s best to check with your accountant for details.

Can I use revolving credit for VAT bills?

Yes, many businesses use it to cover VAT payments while waiting for sales revenue to come in.

What happens if my Black Friday sales don’t cover the repayment?

Most lenders will work with you to adjust repayment terms. But it’s important to speak with your lender early. Don’t wait until you’re in trouble.

How quickly can I access funds with a revolving credit facility?

Typically 24-48 hours once approved. That’s faster than most term loans, making it suitable for last-minute needs.

Can I repay early without penalties?

Most revolving credit facilities let you repay early without extra fees. But always double-check the terms to be sure.

What’s the maximum amount I can borrow?

Limits vary, but £10,000-£250,000 is common for SMEs. Your limit will depend on your specific business’s financial health.

Do I need collateral for a revolving credit facility?

Not usually. Most credit facilities are unsecured, but lenders may ask for a personal guarantee for larger amounts.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.