TL;DR: A drawdown is the act of taking funds from a committed financing facility. The draw period is the window during which a borrower is allowed to draw. Together they let a company access committed capital in stages, drawing only what it needs, when it needs it.
A drawdown is when a borrower takes capital from a facility that has been committed by a lender. A facility may be approved in full but drawn in portions over time. Interest typically accrues only on the amount drawn, so undrawn capital does not yet carry an interest cost.
The draw period is the defined window in which drawdowns are permitted. After it closes, no further amounts can be drawn, and the facility moves into its repayment phase. Draw periods give a company flexibility to time its access to capital around its actual needs.
Drawdowns and tranches are closely linked. A facility split into tranches is drawn tranche by tranche, often as the company meets agreed conditions. The combination lets capital be released and drawn in step with the company's growth, keeping the cost of capital aligned with deployment.
Do I pay interest before I draw? Generally interest accrues only on drawn funds, though some facilities carry a small commitment fee on undrawn amounts. Terms vary.
What happens when the draw period ends? No further capital can be drawn, and the facility moves into repayment on the drawn amount under its agreed terms.
Related terms: Tranche · Maturity Date · Term Sheet · Venture Debt
