Quick answer
A drawdown is the release of loan money to the borrower, or to whoever the borrower directs, such as a seller or supplier. A term loan is usually drawn in one go at settlement; a line of credit or construction facility can be drawn in several amounts over time. Interest generally runs only on the amount drawn, from the day it's drawn.
Key points
- Approval isn't drawdown: conditions in the letter of offer must be met first
- Term loans usually draw once; lines of credit and construction loans draw in stages
- Interest normally starts on each amount from the day it's drawn
- Some facilities charge a line fee on the undrawn limit as well
Is the loan yours once it’s approved? Not quite. An approval is a promise to fund on certain terms. Drawdown is when the money actually leaves the lender’s hands, either into your account or directly to someone you owe, like a vendor, a supplier or the ATO. Many of the questions owners ask about timing and interest come down to the gap between those two moments.
What happens before the first drawdown
Between approval and drawdown sits a list of conditions, set out in the letter of offer. A conditional approval becomes unconditional once they’re satisfied. Typical items:
- signed loan agreement and any guarantees
- security registered, such as a mortgage on a title or a security interest on the PPSR
- a valuation that supports the amount
- proof the business is up to date with something specific, for example a lodged BAS
- payout letters if the loan is refinancing existing debt
Each one can hold up the money. Delays at this point are rarely about the credit decision; they’re about paperwork, so sending documents back promptly is one of the few things a borrower can do to speed things up.
Single drawdown or staged?
| Facility | How it’s drawn | Interest and fees |
|---|---|---|
| Term loan | Usually once, in full, at settlement | Interest on the full amount from day one |
| Business line of credit | Any amount up to the limit, as often as needed | Interest on the drawn balance; often a line fee on the limit |
| Construction and development finance | In stages as the build progresses, called progress draws | Interest builds as each stage is drawn; often capitalised |
| Equipment finance | Paid straight to the supplier on delivery or invoice | Repayments start from the funding date |
A line of credit is revolving credit: repay some and you can draw it again. A term loan isn’t; once drawn and repaid, the money is gone unless you apply again. Our comparison of lines of credit and term loans covers which suits which job.
If you’re not sure which shape of facility fits, run it past our team and we can compare the options with you.
A worked example of staged drawdowns
A Newcastle builder takes a $900k construction facility to build three townhouses. The lender releases money against a schedule, each draw approved after a quantity surveyor inspects the site:
| Stage | Drawn | Total drawn |
|---|---|---|
| Land settlement and site works | $320k | $320k |
| Slab and frame | $250k | $570k |
| Lock-up | $190k | $760k |
| Fit-out and completion | $140k | $900k |
During the early months, interest runs on $320k, not $900k. That’s the main financial benefit of staged drawdowns: the borrower pays for money only once it’s actually been used. The flip side is that each draw depends on an inspection and the work being done, so a slow stage can hold up the money needed to pay trades for the next one.
Approval in hand but the drawdown is dragging?
Sometimes a bank approves a loan and then the conditions stack up until the deadline the funds were meant for has passed. If that’s where you are, a faster, shorter facility can bridge the gap until the main loan draws. Sixty seconds covers the form. We won’t pull your credit report to read it. It reaches a real person on our team, not a ring of lenders, and they’ll call you with options. Put the real deadline and the exact sum on the form; getting those right lets us steer you to the right funder on the first call.
Frequently asked questions
How long after approval can I draw down?
It depends on the conditions in your letter of offer. Once loan documents are signed, security is in place and any conditions precedent are satisfied, an unsecured fintech loan can be paid out the same or next business day. A property-secured loan draws at settlement, which may be days or weeks later.
Do I pay interest on money I haven't drawn?
Not interest as such, but many lines of credit and construction facilities charge a line fee or commitment fee on the full limit, drawn or not. Check the fee schedule so you know the cost of keeping unused room.
Can a lender refuse a drawdown after approving the loan?
Yes, in some circumstances. Most agreements let the lender decline a drawdown if a condition hasn't been met, if you're in breach, or if something material has changed, such as a large new debt or a fall in the security's value.
What is a drawdown notice?
A written request, usually on the lender's form or through its online portal, asking for a specific amount to be paid out on a set date. Construction and larger corporate facilities often require one for each draw, sometimes with supporting invoices or a quantity surveyor's report.
Is the drawdown date the same as the settlement date?
For a property-secured term loan, usually yes: funds are drawn and paid out at settlement. For a line of credit, settlement sets the facility up and you then draw whenever you need funds.