Resources / Glossary / Delayed draw term loan

Delayed draw term loan.

Aka. DDTL · Delayed draw facility
All terms

What is a delayed draw term loan?

A delayed draw term loan (DDTL) is a committed term loan that the borrower can draw in one or more tranches over a defined availability period, instead of taking the full amount at close. The capital is contractually committed up front; the funding is deferred until the borrower needs it.

It sits between a term loan and a revolver. Like a term loan, once a DDTL tranche is drawn it generally cannot be repaid and redrawn — it amortizes or sits as funded debt. Like a revolver, the undrawn commitment is available on demand within the window and carries a fee for being held open.

DDTLs are common in buy-and-build strategies and capital-intensive plans. A sponsor that expects a series of bolt-on acquisitions can commit the financing once and draw against it deal by deal, avoiding a fresh syndication each time.

How a delayed draw term loan actually works

A DDTL is committed once and drawn against a clock.

  1. Commit. Lenders agree to a total DDTL amount and an availability period — the window during which it can be drawn.
  2. Hold open. During the window, the borrower pays a ticking fee on the undrawn commitment, compensating lenders for reserving the capital.
  3. Draw. When a qualifying need arises — often a defined acquisition or capex project — the borrower draws a tranche, sometimes subject to conditions like a pro forma leverage test.
  4. Convert. Each drawn tranche typically takes on the same pricing and terms as the existing term loan and joins it as funded debt.
  5. Expire. Any commitment left undrawn when the window closes simply lapses.

Frequently asked.

4 questions
01 How is a DDTL different from a revolver?

A revolver can be drawn, repaid, and redrawn repeatedly over its life. A DDTL can be drawn during its availability window, but once drawn it generally cannot be repaid and reborrowed — it behaves like funded term debt. The DDTL is for known, lumpy future spending; the revolver is for recurring liquidity swings.

02 What is a ticking fee?

A ticking fee is the charge a borrower pays on the committed but undrawn portion of a DDTL during its availability period. It compensates lenders for setting aside capital they may have to fund, and it tends to step up the longer the commitment goes unused.

03 Why do sponsors like delayed draw term loans for buy-and-build?

A roll-up requires capital at unpredictable intervals as bolt-on targets appear. Committing a DDTL up front locks in financing and terms for that pipeline, so each acquisition can be funded by a draw rather than a new financing process — faster execution and price certainty.

04 Are there conditions on drawing a DDTL?

Usually. Draws are often gated by conditions such as the proceeds being used for a permitted purpose, no default existing, and the borrower remaining inside a pro forma leverage threshold after the draw. The credit agreement spells out exactly what unlocks each tranche.

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