Over 90% of the loans Western Solutions Inc. has closed since 2010 have included a draw structure in the documentation. A draw structure allows  for the tax-exempt loan to be closed without the requirement  of the borrower paying principle or interest until the proceeds are drawn. Tax-exempt laws allow for funds to be drawn within a three year period.  If a portion of the funds are not drawn after three years, the draw simply goes away and the borrower does not have to pay on those funds.

Examples of why non-profits use draw structures:

  1. Refinance now and use the draw structure for a building project in the next three years. This will save the borrower from the process of two issuances (one for the refi and another for the building project) which will save on up front fees and time.
  2. A loan that cannot be refinance for 1-3 years.  The draw structure should be completed now to lock the interest rate. Once the loan can be refinanced, the proceeds from the draw structure are then used.
  3. If the borrower is running a capital campaign for a building project, the draw structure could be used if there is a shortfall in the estimated giving.  The draw structure can allow the borrower to build before all the capital campaign funds are collected and then repay the loan when the funds are collected.
  4. If the borrower completes a tax-exempt loan, a draw structure could be set aside for any capital improvement over the next 3 years. If there is a need for a draw of any amount, the draw would be tax-exempt and would not cause an additional issuance.