Drawdown Fee is a one-time fee charged by a bank or financial institution in international trade financing when the borrower actually draws down loan funds under a credit facility agreement, usually calculated as a percentage of the drawdown amount (e.g., 0.5%-1%). It is commonly used in export credit, packing loans, financing under letters of credit, etc. Note: A drawdown fee is different from a commitment fee, which is charged on the undrawn credit line, while a drawdown fee is incurred only upon drawdown; in addition, a drawdown fee may be separate from interest and management fees, and the rate, calculation base, and payment timing must be clearly specified in the financing contract. The difference from an upfront fee is that an upfront fee is paid at signing, while a drawdown fee is triggered with each drawdown. Foreign trade practitioners should carefully review financing agreements to avoid confusing drawdown fees with interest or commitment fees, so as to accurately calculate financing costs.
📝 Examples
1. According to your bank's credit letter, if our company draws down a USD 1 million loan before June 30, we need to pay a drawdown fee of 0.8% of the drawdown amount, i.e., USD 8,000. (Note: a one-time fee payable by the exporter at drawdown)
2. Because the buyer delayed opening the letter of credit, our company made two drawdowns from the bank, and a drawdown fee was charged each time, which increased the actual financing cost. (Note: multiple drawdowns accumulate drawdown fees and affect costs)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner