A construction draw schedule releases financing in stages under the approved budget and agreement. Disbursement may depend on completed work, inspections, invoices, title updates and other conditions. The schedule must work with the builder’s payment needs; a loan approval does not mean the entire construction budget is available as cash on day one.
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How Are Draws Connected to the Budget?
The approved scope and cost categories establish what can be funded. Milestones may follow work such as foundation, framing, mechanical systems and completion, but the actual schedule is project-specific. Ask how soft costs, materials stored off-site and deposits are treated.
Keep approved changes documented. Moving money from one budget category to another may require consent even when the overall total remains unchanged. A change order should be resolved before the team assumes the next draw covers it.
What Happens if the Builder Needs Cash Before a Draw?
Coordinate Both Payment Calendars
A subcontractor may require a $15,000 materials deposit before work starts, while the lender releases funds after completion and inspection. Identify who funds that deposit and how it is later accounted for. A profitable finished project does not solve a cash gap at the foundation stage.
Track the date a request is submitted, the inspection date, approval and disbursement separately. These are different milestones, and delays at any one can affect the next trade.
What Should I Confirm Before Construction Starts?
- Draw documentation and inspection requirements.
- Fees, retainage and final-release conditions.
- Interest treatment for undrawn funds.
- How overruns and budget reallocations are approved.
- Required borrower contribution timing.
Maintain a current cost-to-complete estimate after each draw. If the remaining budget no longer covers the remaining work, raise it immediately rather than using one trade’s money to disguise another shortfall. Completion documentation and the exit loan or sale also need time in the schedule.
Educational information, not a loan offer. Availability and terms depend on the program, property or business, and borrower qualifications. Legal and tax questions should be reviewed with your advisers.