A drawdown is the act of reducing a party's account by a specified amount. Debt drawdown involves gradually issuing funds rather than releasing the entire amount at once. By slowly drawing down the debt, lenders can verify that funds are not misspent before providing more money.
Common Uses
Debt drawdown can be used in large infrastructure projects, and the amount is based on the estimated cost of building the project. Debt drawdown loans are used in public, private and public-private partnership projects.
Drawdown Schedule
Debt drawdown can be restricted to a specific schedule. The schedule can be measured by project completion milestones or percentage of work completed, or it might be set to calendar dates.
Restrictions
Money from a debt drawdown may be used only on material, labor and supporting costs of the project for which the loan is intended. Debt drawdown may also be limited to a specific debt-to-equity ratio. Or the money might be allowed to be used only to improve the value of the project or infrastructure being built.