What Is a Draw Schedule in a Construction Loan?
A draw schedule is the predetermined plan for disbursing construction loan funds in stages (called draws) as specific construction milestones are completed. Rather than advancing the full loan amount at closing, the lender holds the construction budget and releases funds incrementally as the project progresses. Draw schedules protect both the borrower (by ensuring funds are available when needed) and the lender (by tying disbursements to verifiable progress).
How Draws Are Triggered
Each draw is triggered when the borrower or general contractor submits a draw request documenting that a specific milestone has been completed. The lender then sends an independent third-party inspector (typically a licensed contractor or construction manager) to physically verify the work is done as described. Once the inspector approves, the lender advances the draw funds, either directly to the borrower's account or to the title company for distribution to the GC and subcontractors.
Typical Draw Schedule Milestones
A standard residential construction draw schedule might include 5-7 draws at these stages: (1) Closing / mobilization: typically 5-15% of the construction budget for pre-construction costs (permits, engineering, site prep); (2) Foundation complete; (3) Framing complete; (4) Rough mechanicals: HVAC, plumbing, electrical roughed in; (5) Insulation and drywall; (6) Interior and exterior finish work; (7) Final draw: certificate of occupancy issued. Commercial projects often have more detailed 10-15 draw schedules tied to specific scopes of work.
Managing the Draw Process Efficiently
Draw timing can significantly affect project cash flow. Delays in draw approvals, whether from incomplete documentation, inspector scheduling, or lender processing, can slow construction and create friction with GCs and subcontractors waiting on payment. At Riverside Park Capital, we keep the draw process moving. Borrowers submit draw requests with supporting documentation, and our team coordinates inspections and funding within 3-5 business days in most markets.
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Ground-Up Construction Loans
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