Uncommitted facility

Definition

An uncommitted facility is one the lender can offer, reduce or cancel at its discretion, typically "on demand". Many day-to-day overdrafts are technically uncommitted.

In plain terms

It is available until it is not. Convenient and low-fee, but the rug can be pulled exactly when you most need the money.

Why it matters for your company

Never anchor a critical cash flow plan to an uncommitted line. For dependable headroom, use a committed facility such as Creditcorp’s business credit facility.

In practice

Picture a UK limited company whose bank has offered an uncommitted overdraft alongside its current account. Day to day it behaves like ordinary headroom: the finance director draws on it to smooth a gap between paying suppliers and collecting customer invoices, and the bank raises no objection. Nothing on the paperwork obliges the bank to keep behaving that way.

The distinction becomes real at renewal or review time, or if the bank's own risk appetite shifts. Because the facility was never a firm commitment, the company has no contractual footing to insist it continues, however reliable it has felt in practice. A director who has come to treat the overdraft as a fixture may only discover the difference when a review letter arrives asking for the balance to be repaid or restructured.

How lenders read it

From a lender's side, an uncommitted facility is priced and underwritten on the basis that it can be withdrawn, which is precisely why it tends to be cheaper and quicker to arrange than a committed facility. The lender is not holding capital against a firm promise, so it can afford to be more flexible on cost and process — but that flexibility runs in both directions.

Sensible practice is to treat an uncommitted line as a bonus rather than a foundation: useful for smoothing short-term timing gaps, but not something a company should build its core cash flow planning around. Where certainty matters more than cost, a committed facility is the more appropriate tool, precisely because it removes this discretion from the lender's side of the relationship.