21 Aug 2020

Fully Drawn Advance

Finance feed by:

CA Nisha Bagla
B.com (Hons),CA
CA in Practice
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   •    14 Year 1 Month  experience

Fully drawn advance is a financing method which gives you the freedom to take funds or a loan but only for longer durations. It is an ideal way of financing assets which have a long shelf life such as real estate or a manufacturing plant and equipment, etc.

Fully drawn advance allows a business owner to get access to instant cash which could be repaid back on the agreed and predetermined schedule along with interest. In this type of advance, the interest rate charged could be flexible or fixed but the loan is usually secured.

This type of advance is more suited for individual owners as well as for partnership firms and big organisations. The lenders can work on a payment schedule which could be monthly, quarterly, yearly or after six months.
This type of loan is extended for a fixed period only. The full amount is given at the beginning of the loan. Usually, commercial banks and finance companies give out these loans.

Credit cards, invoice financing, overdraft facilities extended by the bank, and line of credit are different types of ways a company access funds. When a company requires funds for a short term then invoice financing is a good option. Here, the customer can get access to funds based on the invoices generated by the company.

An advantage of fully drawn advance with a fixed rate of interest is that the payment structure is known and remains the same till the loan is paid out in full. The rate of interest charged is comparatively less than in variable rate of interest loan.

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