Delayed Draw Term Loan

AAA

DEFINITION of 'Delayed Draw Term Loan'

A special feature in a term loan that stipulates that the borrower can withdraw predefined amounts of the total pre-approved amount of a term loan at contractual times. This special type of term loan is only offered to individuals and firms that meet and maintain certain contractual requirements and have outstanding credit ratings.

INVESTOPEDIA EXPLAINS 'Delayed Draw Term Loan'

There are different types of contractual caveats the borrower must meet, such as maintaining a certain level of cash on hand or maintaining a minimum quick ratio factor. Any contractual obligations will limit the borrower from performing some particular acts, such as over leveraging, but they are still considered a flexible feature for a term loan.

RELATED TERMS
  1. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  2. Equity Financing

    The act of raising money for company activities by selling common ...
  3. Quick Ratio

    An indicator of a company’s short-term liquidity. The quick ratio ...
  4. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  5. Debt Financing

    When a firm raises money for working capital or capital expenditures ...
  6. Leverage

    1. The use of various financial instruments or borrowed capital, ...
RELATED FAQS
  1. How can I use the correlation coefficient to predict returns in the stock market?

    Simple interest is most commonly seen in short-term loans, such as those from payday lenders or pawn shops. You might see ... Read Full Answer >>
  2. What is the difference between secured and unsecured debt?

    The difference between secured and unsecured debt is the presence or absence of collateral backing. Secured Debt For a debt ... Read Full Answer >>
  3. What are some examples of debt instruments?

    Individuals, businesses and governments use common types of debt instruments, such as loans, bonds and debentures, to raise ... Read Full Answer >>
  4. Is the prime rate in the US different from the federal funds rate?

    Although the prime rate and the federal funds rate are closely tied to one another, their base rates differ based on market ... Read Full Answer >>
  5. What is the difference between compounding interest and simple interest?

    Interest is the cost of borrowing money, where the borrower pays a fee to the owner for using the owner's money. The interest ... Read Full Answer >>
  6. Does shopping for the best interest rate affect my credit score?

    Shopping for interest rates does not necessarily affect a person's credit score. When a borrower submits an application to ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  3. Investing Basics

    APR and APY: Why Your Bank Hopes You Can't Tell The Difference

    Banks use these rates to entice borrowers and investors. Find out what you're really getting.
  4. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  5. Credit & Loans

    What is an Unsecured Loan?

    An unsecured loan is based on the creditworthiness of the borrower, and has no collateral securing the loan.
  6. Entrepreneurship

    How Microfinance and Investment Banking Compare

    Investment banks and microfinance institutions (MFIs) provide similar services, but the clients they serve and the incentives that motivate them are very different.
  7. Retirement

    The Purpose Of Having A Social Security Number

    When (and why) it is necessary to use the nine-digit number the United States government issues to individuals and when you should avoid it.
  8. Retirement

    Steps To Replace Or Update Your Social Security ID

    Investopedia's step-by-step guide to filling out the form that gets you a new or replacement Social Security card.
  9. Economics

    Explaining the Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment banking business.
  10. Investing

    Who's Banning Facebook Now?

    Facebook may have over one billion monthly users, but there are many countries, including China, where the social media giant is banned.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center