A delayed draw term loan gives a buy-and-build borrower committed term debt that can be drawn after closing, during an agreed commitment period, when stated conditions are met. It funds add-on acquisitions without borrowing all expected consideration on day one. Financely advises on structure, prepares the file and arranges outreach. Financely is not a lender.
What a Delayed Draw Term Loan Provides
The parties agree a maximum commitment at signing. Part may fund the platform acquisition. The undrawn balance remains available for qualifying add-ons during the commitment period. Once drawn, the amount usually becomes term debt, not a revolving line that can be repaid and redrawn. The value is execution certainty relative to starting a new lender process for every add-on, provided the borrower can satisfy the draw conditions when the target is ready to close.
Commitment Period and Ticking Fees
The commitment period is the window in which unused amounts may be drawn. If a draw is not made before it expires, the unused commitment generally falls away. Set that window against a realistic pipeline.
Undrawn capital is not free. Lenders typically charge a commitment or ticking fee on unused amounts, and ticking fees may increase the longer the commitment stays outstanding. Funded amounts accrue interest. This page does not quote fee levels.
Draw Conditions
A documented commitment is still conditional. Typical conditions include no default; leverage or coverage tests on a pro forma basis after the acquisition and the draw; a permitted acquisition definition; a minimum equity contribution or maximum consideration; guarantor accession and security over the target; know-your-customer and sanctions checks; and bring-down representations, sometimes including no material adverse change. If a target is late, earnings adjustments are aggressive, or integration costs were ignored, the draw can fail even with unused commitment still available.
Delayed Draw Versus an Accordion
| Structure | What the borrower has | Main constraint |
|---|---|---|
| Delayed draw term loan | A committed amount that can be drawn later for agreed uses | Draw conditions, the commitment period, and unused commitment fees |
| Accordion | A contractual route to request more debt | Usually needs willing lenders and an agreed allocation |
| Revolver | Typically revolving working capital capacity | Borrowing base or clean-down rules, and a different use of proceeds |
For a signed add-on with a closing date, committed delayed draw capacity is more executable if the tests will be met. An accordion can still be useful for unplanned capacity, but it should not be described to a seller as cash in hand. See accordion facilities for acquisition finance and add-on acquisition financing.
What Lenders Want to See
Lenders underwrite the platform and the program, not a slogan about roll-ups. They typically want a pipeline that separates signed deals, near-term workstreams and speculative names; an integration plan that is honest about management bandwidth and cost; pro forma leverage and coverage after each planned draw, including working capital, earn-outs and transaction costs; sources and uses for the platform and future add-ons, including equity; and a clear policy on earnings adjustments, plus existing debt terms that allow the draws or a plan to refinance them. Unnamed targets are not a credit case.
Documents to Prepare
Prepare platform historical financials, management accounts and a three-statement model with add-on cases; the current credit agreement, security package and covenant calculations; a pipeline memo, letters of intent where they exist, and diligence for live targets; sources and uses, equity evidence and a post-close liquidity forecast; an integration plan and closing-condition register; and a know-your-customer pack for the borrower and, when a draw is imminent, for the target.
How Financely Helps
Financely works as advisor and arranger: testing whether the need is a delayed draw term loan, an accordion, a single term loan or a combination; packaging the credit memo, model and data room; and coordinating lender outreach. Lenders decide whether to commit, what conditions to impose and whether a later draw is permitted. Financely does not lend, guarantee draws or hold funds.
Frequently Asked Questions
Is undrawn delayed draw capacity guaranteed cash?
No. It remains subject to the conditions in the credit agreement, the commitment period and the absence of default.
How does a delayed draw term loan differ from a revolver?
A revolver is typically available for working capital and can usually be repaid and redrawn. Delayed draw term debt is usually drawn for a defined use, such as an acquisition, and then stays outstanding as term debt.
When is an accordion the better option?
When the borrower needs a path to request more debt but should not pay for a large unused commitment. It is generally less certain than a committed delayed draw.
Does Financely fund the delayed draw?
No. Financely is an advisor and arranger. Third-party lenders provide the facility after approval and documentation.
Describe the financing requirement and the current transaction stage for an initial advisory scope review.
Request a free estimateFinancely acts as an advisor and arranger, not a lender or issuer. Financing is subject to provider appetite, due diligence, compliance approval and documentation. This information is general and is not legal, tax or accounting advice.