Revolving Lines of Credit, "RLOC", are the most common form of borrowing for mid-sized companies. Companies typically enter into RLOC agreements to fund their current assets - typically inventory and receivables. RLOC is often considered a method of financing working capital. (Working capital is the amount of current assets (cash, inventory and receivables) in excess of current liabilities (items such as payables)). RLOC is typically the least expensive form of borrowing.

Revolving lines of credit are almost always a component of senior debt and are provided by Banks and Finance Companies. A RLOC is loaned to a company based on a certain percentage of the appraised liquidation value of the eligible account receivables and inventory. Typically, a company can borrow between 65% and 85% of its account receivables and 30% to 55% of its finished goods inventory. These advance rates range depending on the type, quality and historical performance of the company's current assets.

The amount available for borrowing will vary from day to day and season to season, based on the amount of current assets on hand. The lender will typically develop a borrowing base formula to determine how much can be borrowed at any given time. This formula will generally be reduced by certain non-qualifying assets, such as those receivables that are past due, or inventory that has aged beyond a certain specified period of time. Therefore the effective advance rates are almost always lower than the reported advance rates.

The willingness of a lender to provide a RLOC is further limited by the predictability of cash flow to service senior debt. Though it is common for a RLOC to have no set schedule for principal repayment, it is however generally limited to a term of one to three years with renewal provisions.

Since the assets that collateralize a RLOC are generally very marketable and since RLOCs advance substantially less than 100% of the value of the collateral, the interest cost is generally the lowest cost financing available to a company. Interest rates can range from slightly below prime to three over prime.