Will I pay a fee each time I draw down funds?

2 min read

Per-draw chargeOn some facilities

Adds up if frequentMany small draws

Often freeOn simple term loans

Check before signingAsk about every draw

Where drawdown fees appear

On a straightforward term loan you receive the whole amount once, so there is no drawdown fee to speak of. Drawdown or utilisation fees turn up on flexible products — revolving credit facilities, tranche-based development finance, and some invoice facilities — where you take funds in stages or repeatedly. The fee is usually small per draw, but on a line you use weekly it can accumulate into a meaningful cost.

How the frequency changes the maths

A £25 drawdown fee is trivial once. Drawn fifty times a year it is £1,250, which can dwarf the interest on a lightly-used facility. If your usage pattern is many small draws, a facility that charges per draw may be far dearer in practice than one with a slightly higher rate but free drawdowns. Match the fee structure to how you will actually use the line.

Reducing the impact

If you must use a per-draw facility, batching drawdowns — taking a slightly larger sum less often rather than many small ones — cuts the number of fees, though it means carrying a higher balance and a little more interest. It is a balance worth modelling. Where drawdowns are frequent and unpredictable, prioritise a facility with free or low utilisation charges.

Compare the two patterns on the true cost calculator, and see all the fees to expect. When a flexible line fits, explore a facility.

Frequently asked questions

Do most business loans charge a drawdown fee?

Simple term loans generally do not — you draw the full amount once and the arrangement fee covers set-up. Drawdown fees are mainly a feature of flexible, multi-draw facilities. If you are taking a single lump sum, a per-draw fee should not arise; if it does, query it.

Is a drawdown fee the same as an arrangement fee?

No. An arrangement fee is a one-off charge for setting up the facility, paid at outset. A drawdown fee is charged each time you take funds from an already-established facility. A flexible line can have both: one to set it up, and a smaller one each time you use it.