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Draw
Also called advance request, drawdown, takedown.
A request to take money from an approved facility, turning available credit into an outstanding balance.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
On a revolving line, a draw reduces availability and repayment restores it. On a non-revolving facility, availability does not come back and the line is really an approval to borrow in stages. Which one you have is stated in the agreement and is worth confirming, because both are sold as lines of credit.
Mechanically a draw may require a request form, may be capped at available borrowing base rather than at the stated line amount, and may carry a minimum size. Construction and equipment facilities disburse draws against invoices, inspections or delivery acceptance rather than on demand.
Many short-term online lines charge a fee on each draw, either instead of or on top of interest, and amortize each draw over a short fixed schedule.
Where this one catches people
A per-draw fee turns a line into a sequence of short-term loans. The fee is charged on the drawn amount each time it is taken, so a business that draws twice a month pays it twenty-four times a year while thinking of it as a single-digit percentage. Convert the fee to an annualized cost against how long you actually keep each draw outstanding, then compare it to a term loan.
Worked through
Illustrative. A $20,000 draw carrying a 3% draw fee, repaid in 60 days, costs $600 for two months of use. That is roughly 18% on an annualized basis before any interest on the balance, and it repeats on every draw.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Draw — common questions
What does draw mean?
A request to take money from an approved facility, turning available credit into an outstanding balance.
Where does draw catch people out?
A per-draw fee turns a line into a sequence of short-term loans. The fee is charged on the drawn amount each time it is taken, so a business that draws twice a month pays it twenty-four times a year while thinking of it as a single-digit percentage. Convert the fee to an annualized cost against how long you actually keep each draw outstanding, then compare it to a term loan.
Is draw the same as an interest rate?
Draw is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does draw apply to?
Working Capital, Business Line of Credit, Asset-Based Lending.
Is there a worked example of draw?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside draw?
Availability, Borrowing base, Draw fee, Draw period, Line of credit.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.