What Is a Drawdown Wire and How Does It Work?

A drawdown wire is an electronic funds transfer where money is drawn from one bank account into another, typically initiated by the receiving party or on their behalf. This method offers a controlled mechanism for transferring funds, differing from a standard wire transfer.

Understanding Drawdown Wires

A drawdown wire, also known as a reverse wire, involves a request from the recipient’s bank to “pull” funds directly from a sender’s account. This process requires the sender to grant prior authorization. The fundamental difference from a traditional wire transfer lies in its initiation; a standard wire transfer is a “push” transaction where the sender initiates the transfer, while a drawdown wire is a “pull” transaction initiated by the recipient.

Drawdown wires are primarily used in business-to-business or institution-to-individual transactions. Common applications include payroll services, where a payroll processor initiates a drawdown request to collect funds from an employer’s account before disbursing salaries to employees. Other scenarios include loan disbursements, where a borrower’s bank might draw funds from a lender’s account after loan approval, or in complex inter-company transfers within a large corporate group for centralized treasury management.

Information Required for a Drawdown Wire

The sender, whose account will be debited, must provide their full name, address, bank name, account number, and the appropriate routing number or SWIFT/BIC code. Authorization details are formalized through a “Draw-Down Wire Service Enrollment Form” or a similar written agreement, which allows the sender’s bank to honor future drawdown requests. This authorization remains in effect until the sender provides written notice of revocation, which may require a 30-day period to become effective.

The recipient must also provide their full name, address, bank name, account number, and the corresponding routing number or SWIFT/BIC code. Beyond account details, transaction-specific information includes the exact amount to be drawn and the currency. Any relevant reference or invoice numbers should be included to ensure proper allocation. Banks provide specific forms or templates that consolidate all this required information.

The Drawdown Wire Process

The party initiating the drawdown, typically the recipient’s bank or an authorized third party, submits the request to their financial institution. This submission can occur through various channels, such as a secure online banking portal, a dedicated electronic form, or direct communication with a bank representative.

Once the request is submitted, the recipient’s bank transmits the drawdown request to the sender’s bank through secure financial networks. The sender’s bank then verifies the authenticity of the request against the pre-existing authorization provided by the account holder. If the details match the established agreement, the sender’s bank processes the transfer, debiting the sender’s account and crediting the funds to the recipient’s bank.

Both the sender and the recipient are notified and receive a confirmation number. Fedwire transactions settle in real-time or on the same business day if initiated before the bank’s cut-off time. The initial setup of the authorization agreement with the bank can take one to two weeks. Fees for domestic transfers range from $15 to $50 and are higher for international transactions. Some banks charge both the sender and the receiver.