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Reviewed by Aug 01, 2021| Updated on
A retail credit facility is a form of funding that can provide liquidity for a variety of purposes. Retail credit facilities are loans that are structured with various types of debt that a company can use to meet business needs or lend to clients.
A credit facility is a form of a loan made in the sense of business or corporate finance; it enables the borrower to collect money over an extended period of time, rather than reapplying continuously for funds.
Credit facilities are used extensively across the financial market as a means of providing funding for various purposes. These are often acquired in tandem with the final round of the overall equity funding plan of a company, which includes both the credit facility and investment in equities.
With regard to retail companies, credit facilities can be used as multi-purpose mechanisms for corporate lending, consumer loaning, or packaging of credit accounts. Retail credit facilities may be structured with various debt forms, including term loans and revolving credit accounts.
Retail businesses or real estate retail programs may get funding for their own needs in the form of a retail credit facility. In this situation, the company is working with a lender, often a large bank, to get a credit portfolio that can be used to fund business-related operations and ventures.
Retail credit facilities can involve business-to-business transactions, as in a firm availing financing via a bank. Retail credit facilities can also involve business-to-consumer transactions, in which a retailer provides credit to customers concerning purchases which involves big-ticket products. Retail lending is typically a complex process that is accomplished through a third-party relationship with a credit provider.
In some cases, the term retail credit facility might refer to a structured investment product bundled with a retail credit card portfolio. A few lenders may choose to bundle and sell a secondary market retail credit card facility, which can lower the risk of a lender's balance sheet and provide additional capital for new loans.