Delayed Draw Loan
Private Credit glossary · Loan Structures & Instruments
Definition
A term loan facility where the borrower has the option to draw additional principal (up to a committed amount) after the initial closing, typically within 12–18 months, subject to conditions. Used to fund future add-on acquisitions or capex. The lender earns a ticking fee (typically 50–100 bps) on undrawn commitments.
Delayed Draw Loan in plain English
A delayed draw loan is like a lender pre-approving you for money you don't need yet but might soon. Instead of taking the whole loan on day one, the borrower gets the RIGHT to pull more chunks of cash later (usually within 12–18 months) whenever they need it — say, to buy another company or fund a big purchase. It's like getting approved for a $50,000 home-renovation loan but only actually borrowing (and paying interest on) the pieces as each stage of the work begins. Because the lender has to keep that promised money set aside and ready, the borrower pays a small holding charge — a 'ticking fee,' often around 0.5% to 1% a year — on the amount they haven't drawn yet.
Learn these first
Related Private Credit terms
Private Credit practice questions · Private Credit flashcards · Private Credit study guide