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A Delayed Draw Term Loan (DDTL) is a committed loan facility in which the lender agrees to make funds available at a future date, or over multiple future dates, rather than disbursing the full amount at closing. The borrower accesses those funds when they are needed, typically to fund acquisitions, capital expenditures, or refinancing of existing debt. Interest accrues only on the drawn portion, not on the entire committed facility. Until a draw is made, the borrower pays a commitment fee, often called a ticking fee, on the undrawn balance.
DDTLs are a central feature of private credit and leveraged buyout structures, and they have gained traction in the broadly syndicated loan market as private credit lenders use them to compete on flexibility.
A DDTL sits alongside the primary term loan in a deal's capital structure. After the initial loan closes and the day-one acquisition is funded, the borrower can draw from the DDTL during the availability period, which typically runs 12 to 24 months after closing. Each draw is subject to agreed conditions, usually including no event of default, compliance with financial covenants on a pro forma basis, and the draw staying within the defined use-of-proceeds scope.
Once drawn, funds cannot be re-borrowed after repayment. That is what separates a DDTL from a revolving credit facility. Revolvers are designed for working capital and can be drawn and repaid repeatedly. A DDTL is long-term capital, intended for one-directional deployment into specific investments.
While the DDTL sits undrawn, the borrower pays a ticking fee on the uncommitted balance to compensate the lender for holding capital in reserve. In private credit, the ticking fee is typically a flat 1% per annum on the undrawn amount. In the broadly syndicated loan market, the ticking fee is usually a percentage of the loan's underlying margin rate, which makes it more expensive than the private credit standard.
Most DDTL structures include a grace period of 30 to 60 days after closing before the ticking fee begins. This gives the borrower time to identify and execute a first acquisition before fees start accruing on unused capacity.
Private equity sponsors using a buy-and-build strategy need capital readily available for add-on acquisitions that may close months after the initial platform deal. Without a DDTL, the sponsor must either fund acquisitions with bridge equity, refinance the entire capital structure each time, or walk away from attractive targets because committed financing is unavailable.
A DDTL solves the problem by giving the sponsor a contractual commitment from the lender that capital will be there when needed, on the same terms as the original loan. R1 RCM's $3 billion syndicated financing in October 2024, backing a buyout by TowerBrook Capital Partners and Clayton Dubilier and Rice, included a $200 million delayed draw component alongside a $2.8 billion funded tranche.
| DDTL | Revolving Credit Facility | |
|---|---|---|
| Re-Borrowing After Repayment | No; once repaid, the drawn portion is gone | Yes; revolver capacity restores upon repayment |
| Primary Purpose | Acquisitions, capex, strategic investment | Working capital, short-term liquidity |
| Commitment Fee Type | Ticking fee on undrawn amount; typically flat 1% p.a. | Commitment fee on undrawn amount; typically 0.25% to 0.50% |
| Maturity | Same final maturity as the primary term loan | Typically shorter; often five years |
Lenders and borrowers negotiate draw conditions upfront. Borrower-friendly structures tie draws to meeting predetermined milestones, giving the borrower predictable access once those milestones are hit. Lender-friendly structures retain discretion for the lender even after conditions are met, providing the lender more control over timing and deployment.
As DDTLs have grown in private credit, purpose clauses have broadened. Early DDTLs were tied to a single, identified acquisition. Today they may cover a range of specified and unspecified acquisitions, capital expenditures, and even debt repayment, with availability periods extending up to two to three years.
With deep roots in traditional finance and the digital asset industry, Acquire.Fi operates as a specialist M&A advisory firm. Coverage spans M&A, secondaries, OTC, and capital markets advisory across digital assets and frontier tech. Our team has decades of combined experience across every stage of the deal lifecycle.
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