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In some credit facility proposals, the proposal reflects an overall "accepted" level of lending the lender is willing to take when lending to a customer (known internally by an "Approved Facility Limit".
Most recently in view of the Regulatory Capital requirements, each bank/lender is required to maintain a minimum required capital in proportion of "Committed/advised" limits to the borrower. As such, a lender under a specific regulatory capital framework must assess the expected level of "utilization" of the granted limit by the borrower.
As "unutilized" limits would still attract capital allocation, lenders nowadays prefer to adopt a technique of advised/unadvised facility limits whereby:
Advised Limits/Facilities are the limits that are advised to the borrower knowing that the borrower has the explicit right to damn draw down as per the agreed T&Cs and for which regulatory capital must be maintained at all times.
Unadvised Limits/Facilities that the lender is happy to take upon demand of the borrower as per internal approved exposure but are not advised (nor committed) to the borrower and for which no capital required is required to be maintained by the lender until such point they become advised/committed.
The merit of this technique is to save the cost of capital and save time when the borrower request additional.ad-hoc facilities without the need to perform a fresh comprehensive credit analysis to obtain approvals as the unadvised limits are considered as 'pre-approved" and only required to be advised and committed.
An uncommitted(unadvised) facility is an agreement between a lender and a borrower whereby the lender agrees to make funding available to the borrower, but is under no obligation to provide a specific amount of money. Uncommitted facility loans are generally for a short period of time (i.e., less than one year). This is in contrast to a committed facility (advised facility )that involves clearly defined terms and conditions set forth by the lending institution and imposed upon the borrower.
