A delayed draw term loan (DDTL) is a term loan facility where the borrower may draw portions of the committed amount later — subject to conditions — instead of receiving full proceeds at closing.

How it works

Credit agreements specify commitment amount, draw schedule, and conditions precedent — often no material adverse change, compliance with covenants, and sometimes acquisition thresholds.

Borrowers pay commitment fees on undrawn balances (often 25–50% of the spread) plus interest on funded amounts. DDTLs appear in LBO packages to finance future add-on acquisitions and in growth lending for staged expansion.

Each draw typically matures on the same schedule as the initial term loan, sometimes with a short availability window — unused commitments expire if not drawn by a cutoff date.

Venture debt less commonly uses formal DDTL structures, but some growth facilities offer multi-tranche draws tied to revenue milestones — functionally similar.

Why it matters

• Founders: In PE platforms, DDTL capacity supports buy-and-build strategy without repeated bank syndication. Understand fees on idle commitments.
• Investors: LBO models include DDTL draws for pipeline deals. Unused capacity can inflate enterprise value if markets assume full deployment.

Common mistake

Assuming committed DDTL is always available. Lenders can refuse draws if covenants break or if the proposed acquisition fails credit tests.

Related ideas

See also direct lending, covenant, revolver vs term loan, and acquisition financing.