Draw schedule
A draw schedule is the plan for releasing a construction or rehab loan’s budget in stages as work is completed. Each draw is paid after an inspection confirms the work, so loan funds track the value added to the property.
How a draw schedule works
The renovation or construction portion of a loan is not paid out at closing. The lender holds it back and releases it in draws tied to the budget, usually by line item or by stage (for example foundation, framing, rough-ins, drywall, finishes). For each draw, the borrower requests funds, an inspector visits or reviews photos to confirm the work, and the lender pays the amount earned, often net of a retainage holdback and a draw fee. Lien waivers and an updated title check protect the lender’s lien priority as contractors are paid.
Federal bank guidelines say that loan disbursements on construction projects should not exceed actual construction outlays. A draw schedule is how a lender makes that true in practice.
Why it matters to a private lender
Draws are where construction and fix-and-flip loans go right or wrong. Paying ahead of the work leaves the lender with a loan larger than the property is worth if the borrower walks away. Draws that are slow or inconsistent strain the borrower and delay the exit. Capital partners and loan buyers look at a lender’s draw process, inspection reports and remaining-budget tracking during due diligence.
Example
Hypothetical. A $120,000 rehab budget is split into four draws of $30,000. After the first inspection shows demolition and framing finished, the lender releases $27,000, holding back 10% until completion.
Where Lender Capital fits
Lender Capital places first-lien, business-purpose real estate loans with capital partners. You apply once, then submit each loan with the full file. We send it only to capital partners whose criteria it fits, one partner funds the whole loan at closing and it is assigned to them. You keep your points (less the placement fee), earn the spread above the partner’s rate and service the loan. You pay a placement fee only when a loan funds.
Lender Capital is a business-to-business platform. This page is general information, not legal, tax or securities advice. Terms of warehouse lines and other funding sources vary by provider; confirm them with each provider and your counsel.