Drawdown - Revision history

Designing Buildings at 06:51, 19 April 2021

2021-04-19T06:51:36Z

← Older revision		Revision as of 06:51, 19 April 2021
Line 1:		Line 1:
	= Introduction =		= Introduction =

−	~~Drawdown is a term that is generally associated with~~ property development ~~financing. It~~ can have numerous meanings, including a portion of the funding - or drawdown - received incrementally over the ~~span~~ of the project. Under this definition, a drawdown on ~~the~~ loan may be taken in stages to finance ~~equipment for the~~ project. The incremental distribution of funds is sometimes referred to as a progressive drawdown.	+	In relation to property development finance, the term 'drawdown' can have numerous meanings, including a portion of the funding - or drawdown - received incrementally over the duration of the project. Under this definition, a drawdown on financing (such as a loan) may be taken in stages to finance a project. The incremental distribution of funds is sometimes referred to as a progressive drawdown.

−	In some instances, drawdown may refer to the initiation ~~of the act~~ of a transaction - or drawdown - under a loan agreement. Under this definition, funds can become available (or are officially borrowed) on a drawdown date. It can also be an amount of money - or drawdown - borrowed for a specific purpose. This usage is considered informal and is not traditionally used in the context of property development financing.	+	In some instances, drawdown may refer to the initiation of a transaction - or drawdown - under a loan agreement. Under this definition, funds can become available (or are officially borrowed) on a drawdown date. It can also be an amount of money - or drawdown - borrowed for a specific purpose. This usage is considered informal and is not traditionally used in the context of property development financing.

−	When not associated with financial matters, drawdown may ~~be associated with~~ the controlled reduction of fluids or pressure wells, reservoirs and so on.	+	When not associated with financial matters, drawdown may refer to the controlled reduction of fluids or pressure wells, reservoirs and so on.

	= Drawdown and cash flow =		= Drawdown and cash flow =
Line 11:		Line 11:
	The incremental distribution of funds is sometimes referred to as a progressive drawdown. While a progressive drawdown provides resources as needed, the success of this approach may require careful planning to ensure cash is distributed at the appropriate stages based on the progress of the project.		The incremental distribution of funds is sometimes referred to as a progressive drawdown. While a progressive drawdown provides resources as needed, the success of this approach may require careful planning to ensure cash is distributed at the appropriate stages based on the progress of the project.

−	If ~~funding~~ is dictated by ~~the~~ schedule provided by the ~~financial institution~~, this may present issues during times when increased spending is necessary, but money is not available. There may also be periods when less money is required, and an unsuitable drawdown schedule will result in the unnecessary release of funding.	+	If drawdown is dictated by a schedule provided by the funder, this may present issues during times when increased spending is necessary, but money is not available. There may also be periods when less money is required, and an unsuitable drawdown schedule will result in the unnecessary release of funding.

	With a progressive drawdown, it is possible to lower interest payments when compared to situations where the entire amount is borrowed at the start of the project. However, if too much of a progressive drawdown is taken too quickly, this can result in the accrual of additional interest.		With a progressive drawdown, it is possible to lower interest payments when compared to situations where the entire amount is borrowed at the start of the project. However, if too much of a progressive drawdown is taken too quickly, this can result in the accrual of additional interest.

−	The agreed interest rate and drawdown facilities should be provided in the funding or loan contract. Interest rates might be fixed, variable and/or capped. Drawdown facilities (often on a quarterly basis) need to be more than sufficient and timed to meet ~~contractor's~~ monthly valuations. Often developers will base residual value calculations on drawing down all construction and professional payments by the two thirds stage of the ~~building period~~ to avoid any risk of defaulting on payments.	+	The agreed interest rate and drawdown facilities should be provided in the funding or loan contract. Interest rates might be fixed, variable and/or capped. Drawdown facilities (often on a quarterly basis) need to be more than sufficient and timed to meet monthly valuations. Often developers will base residual value calculations on drawing down all construction and professional payments by the two thirds stage of the project to avoid any risk of defaulting on payments.

	Careful planning cannot always anticipate emergency situations that may have an impact on the progress of a project and the allocation of resources. In these instances, drawdown contingency management measures should be considered. One consideration may be the creation of a contingency drawdown curve which can be updated regularly for revised forecasting.		Careful planning cannot always anticipate emergency situations that may have an impact on the progress of a project and the allocation of resources. In these instances, drawdown contingency management measures should be considered. One consideration may be the creation of a contingency drawdown curve which can be updated regularly for revised forecasting.

Editor at 17:49, 15 April 2021

2021-04-15T17:49:02Z

← Older revision		Revision as of 17:49, 15 April 2021
Line 33:		Line 33:
	* Cash flow in construction.		* Cash flow in construction.
	* Funding options.		* Funding options.
		+	* Interim certificates in construction contracts.
	* Milestone payment.		* Milestone payment.
	* Residual valuation of land.		* Residual valuation of land.
	* Right to payment.		* Right to payment.
		+
		+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Definitions]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]

Editor at 17:46, 15 April 2021

2021-04-15T17:46:39Z

← Older revision		Revision as of 17:46, 15 April 2021
Line 31:		Line 31:
	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =

		+	* Cash flow in construction.
	* Funding options.		* Funding options.
	* Milestone payment.		* Milestone payment.
	* Residual valuation of land.		* Residual valuation of land.
		+	* Right to payment.

Editor: Created page with "= Introduction = Drawdown is a term that is generally associated with property development financing. It can have numerous meanings, including a portion of the funding - or draw..."

2021-04-15T17:42:22Z

Created page with "= Introduction = Drawdown is a term that is generally associated with property development financing. It can have numerous meanings, including a portion of the funding - or draw..."

New page

= Introduction =

Drawdown is a term that is generally associated with property development financing. It can have numerous meanings, including a portion of the funding - or drawdown - received incrementally over the span of the project. Under this definition, a drawdown on the loan may be taken in stages to finance equipment for the project. The incremental distribution of funds is sometimes referred to as a progressive drawdown.

In some instances, drawdown may refer to the initiation of the act of a transaction - or drawdown - under a loan agreement. Under this definition, funds can become available (or are officially borrowed) on a drawdown date. It can also be an amount of money - or drawdown - borrowed for a specific purpose. This usage is considered informal and is not traditionally used in the context of property development financing.

When not associated with financial matters, drawdown may be associated with the controlled reduction of fluids or pressure wells, reservoirs and so on.

= Drawdown and cash flow =

The incremental distribution of funds is sometimes referred to as a progressive drawdown. While a progressive drawdown provides resources as needed, the success of this approach may require careful planning to ensure cash is distributed at the appropriate stages based on the progress of the project.

If funding is dictated by the schedule provided by the financial institution, this may present issues during times when increased spending is necessary, but money is not available. There may also be periods when less money is required, and an unsuitable drawdown schedule will result in the unnecessary release of funding.

With a progressive drawdown, it is possible to lower interest payments when compared to situations where the entire amount is borrowed at the start of the project. However, if too much of a progressive drawdown is taken too quickly, this can result in the accrual of additional interest.

The agreed interest rate and drawdown facilities should be provided in the funding or loan contract. Interest rates might be fixed, variable and/or capped. Drawdown facilities (often on a quarterly basis) need to be more than sufficient and timed to meet contractor's monthly valuations. Often developers will base residual value calculations on drawing down all construction and professional payments by the two thirds stage of the building period to avoid any risk of defaulting on payments.

Careful planning cannot always anticipate emergency situations that may have an impact on the progress of a project and the allocation of resources. In these instances, drawdown contingency management measures should be considered. One consideration may be the creation of a contingency drawdown curve which can be updated regularly for revised forecasting.

= Drawdown requirements =

There is some general information that is typically part of financing arrangements that have drawdown agreements. This may include a specific time period for transactions (depending on agreed upon conditions) referred to as a conditions precedent.

A conditions precedent is used to safeguard funds. It requires that certain events take place in order for the contract to be valid. It may also require the submission of certain documentation, including:

* Official documents (such as project agreements) for borrowers and those providing security.
* Proof of authorisations (documents power and capacity) for borrowers and those providing security.
* Licences and consents evidence.

= Related articles on Designing Buildings Wiki =

* Funding options.
* Milestone payment.
* Residual valuation of land.