Plain definition
A committed facility is funding a lender has contractually agreed to make available up to a stated limit during an agreed period, provided the borrower meets specified conditions. That commitment gives more certainty than a discretionary line, but it is not an unconditional cash balance. Conditions can include giving notice, making accurate representations, staying within financial covenants, and having no event of default.
Illustrative example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A company has a committed facility and has borrowed . It forecasts a supplier payment that needs another next week. The arithmetic suggests room under the limit, but the finance manager first confirms that the required notice can be given and that the latest covenant test remains compliant. If the company is in default, the lender may not have to fund the draw despite the unused amount.
| Committed facility limit | |
|---|---|
| Amount already drawn | |
| Undrawn amount |
Commitment describes the lender’s contractual promise within the agreement; drawability still depends on the agreement’s conditions.
Why it matters
Calling every facility ‘available liquidity’ can overstate what the business can actually use. The distinction matters most in a stressed forecast, when a missed covenant or late notice is more likely and cash alternatives are scarce. It prevents management from committing to payments on the assumption that a theoretical limit is spendable.
Practical consequence
Maintain a facility register with the limit, drawn amount, undrawn amount, expiry, notice period, conditions, and covenant dates. Before relying on capacity, have the responsible person confirm the draw checklist against the current facts. Forecast committed and uncommitted funding separately, and preserve another action—such as deferring a purchase—if a condition is not met.