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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Uncommitted facility

What is an uncommitted facility, and can the bank refuse a drawing?

ONE OF 209 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

An uncommitted facility is a limit the bank has approved but not promised: each drawing is at the bank's discretion, and the bank can decline one without any default having occurred. It costs less, usually with no commitment fee, and banks use it for trade lines, overdrafts and seasonal funding. A committed facility obliges the bank to lend while its conditions are met, which is why it carries a fee on the undrawn amount, and why a borrower's liquidity plan should rest on committed money.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WHAT IT IS NOT

Repayable on demand is about money already lent; uncommitted is about whether new money must be lent. Many uncommitted facilities are both.

// WORKED IN

// NEXT TO IT

FACILITIES AND THEIR SHAPE

All 209 terms on one page