An interest-on-drawn-only facility means that the developer is charged interest solely on the amount actually drawn down from the loan, not on the total facility size. This reduces cost during early phases and improves cash efficiency, especially in phased developments or schemes with staggered build schedules. Within UK property development finance structures, this feature is common in revolving credit facilities and senior development loans, providing more tailored cost exposure as cash is released in line with project progression and verified spend.
Within a Senior Revolving Credit Facility, an interest-on-drawn-only structure refines how borrowing costs track actual capital deployment, making it particularly effective for developments with uneven expenditure profiles. It aligns lender return more closely with real utilisation rather than committed headroom, which can materially improve early-stage cash flow and reduce negative carry. This approach is often compared with a Rolling Re-Draw Facility, although the latter focuses more on capital recycling than cost efficiency. From a legal perspective, compliance with draw conditions remains critical, as any Breach of Agreement can restrict further utilisation. Performance is typically monitored against CFADS (Project) to ensure interest obligations remain sustainable.
View glossary entry