Delayed Draw Term Loan
Candlefocus EditorDDTLs typically specify timing and amount of funds received over a period of time. Frequency of payments and total loan amount may vary depending on the parties involved. Each payment or ‘draw’ can be timed to coincide with a milestone event or happen on a regular, periodic schedule. For example, a company might arrange to receive draws every three months, six months, or one year.
Borrowers may find that a DDTL structure works best for them when they know they will need periodic funding over the foreseeable future but don’t know the exact timing or the amounts of money they will require. In this case, DDTLs can offer more reliable and consistent cashflow, capitalizing on any surplus funds.
Unlike some other loan structures, DDTLs are flexible. The terms of a DDTL are tailored to the needs of each business, and they can be easily adjusted to fit changing circumstances. This is partly due to the fact that the agreement only deals with the amounts, dates, and timing of loans. The lender and borrower can also include break-up fees, early repayment options, and other clauses that are tailored to their individual situation.
All in all, Delayed Draw Term Loans are an excellent choice for businesses that need reliable, flexible loans. The guaranteed cash flow and adjustable terms give borrowers better control of their finances, helping them manage their cash needs, take advantage of favorable market conditions, and position their business for long-term success.