Recoverable Draw

Recoverable Draw vs. Non-recoverable Draw

As previously mentioned, in some commission-based compensation plans, the sales team can borrow against future earnings to maintain a more stable income. This is called a draw against commission. There are two types of draws—recoverable and non-recoverable.

Both types of draws are intended to help sales reps earn a livable wage during ramp periods, seasonal lows, long sales cycles, and any other time when it becomes difficult for reps to earn commissions to cover their living expenses.

For recoverable draws, the salesperson pays the balance they owe from previous draws as soon as they start earning commission. The amount they owe is taken from the commission they earn. Once their draw balance has been paid off entirely, they will receive the full amount of their commission.

A non-recoverable draw is a loan that can be taken out to help you make a living. Unlike a recoverable draw, a non-recoverable draw does not need to be paid back in the next pay period and does not carry over as debt. You can think of a non-recoverable draw as a guaranteed minimum commission payment.

Example of a Recoverable Draw

In this example of a recoverable draw, let’s pretend this is the pay for an established AE. The company has instituted a draw amount of $2,000.00 to offer some stability for reps during seasonal low periods. Here’s what that would look like in practice: