A revolving credit agreement is a formal line of credit usually used by large firms. The firm will pay a fee on the unused balance of the committed funds to compensate the bank for the commitment to extend those funds.

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A revolving credit agreement typically involves a fee on the unused portion of the credit line, which compensates the lender for the commitment to extend credit. Large firms often use revolving credit agreements to manage their cash flow needs.

A Revolving Credit Agreement Is a Formal Line of Credit