---
title: "What Is Delayed Draw Term Loan?"
term: "Delayed Draw Term Loan"
description: "A delayed draw term loan (DDTL) is committed debt that the borrower can draw down in tranches over time — paying interest on funded amounts while preserving optional future liquidity."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/delayed-draw-term-loan
---

# What Is Delayed Draw Term Loan?

> A delayed draw term loan (DDTL) is committed debt that the borrower can draw down in tranches over time — paying interest on funded amounts while preserving optional future liquidity.

**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](/glossary/direct-lending), [covenant](/glossary/covenant), revolver vs term loan, and acquisition financing.

## FAQ

### What is a delayed draw term loan in simple terms?

Lenders commit money you can pull later — for example $100M total with $40M funded now and $60M available for future acquisitions. You typically pay a fee on undrawn amounts and interest only on what you use.

### Why does delayed draw term loan matter?

For founders in PE-backed roll-ups, DDTLs fund bolt-ons without renegotiating credit each time. For investors, they provide flexible firepower but add commitment fees and covenant risk when draws occur.


---
Source: https://venturecapitaltracker.com/glossary/delayed-draw-term-loan