Drawdown — Business Finance Glossary

The drawdown process

Once a facility is committed and conditions precedent (CPs) have been satisfied, the borrower submits a drawdown notice — sometimes called a utilisation request — to the lender or agent bank within the timeframe specified in the agreement. The notice sets out the amount, the currency, the requested value date, and the interest period the borrower wishes to select.

The lender then funds the drawing to the borrower's nominated account on the value date. For syndicated facilities, the agent collects funds from each bank in the syndicate before passing them to the borrower.

Conditions precedent to drawdown

Every drawdown is conditional on representations and warranties remaining true and no event of default (or potential event of default) having occurred and being continuing. On the first drawdown, the full suite of initial CPs must be satisfied — legal opinions, security documents, constitutional documents, and facility agreement execution. For subsequent drawings under a revolving facility, a deemed repetition of representations typically suffices without additional documentation.

• Failure to satisfy a CP prevents drawdown even if the facility is fully committed
• Some CPs can be waived by the lender — negotiate this flexibility upfront
• Directors' certificates confirming no default are common at each drawdown

Drawdown limits and availability periods

Term loans are often subject to an availability period — a window during which drawdowns may be made. If the borrower has not fully drawn by the end of the availability period, the undrawn commitment is cancelled and a non-utilisation fee may have accrued on it. Revolving facilities allow drawdowns throughout the commitment period, subject to the aggregate outstanding not exceeding the facility limit.

Some facilities permit multiple tranches with separate availability periods — for example, a committed but undrawn capex tranche that can only be accessed once a defined project milestone is reached.