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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Working capital facility

What is a working capital facility, and what is it actually sized against?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A working capital facility — usually a revolving limit rather than a term loan — funds the gap between paying suppliers and being paid by customers. It is sized against the cash conversion cycle applied to the revenue base, not against the borrower's stated need and not against the value of security. The most common structural failure in commercial lending is a working capital need financed as term debt, or a limit set to a round number that has no relationship to the cycle it is meant to bridge.

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.

// IN THE BOOK

Developed in chapter 3, Reading Real Demand vs. Plugging Holes.

// WORKED IN

// NEXT TO IT

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