A draw is a scheduled disbursement or payment from a construction loan, typically tied to completion of defined construction milestones or percentage of work in place. Most residential construction loans are structured with 5-8 draws over the project timeline. The schedule, percentages, and triggers vary by lender and loan type.
Each draw requires documentation: a draw request from the general contractor, conditional lien waivers from the GC and major subs confirming payment up to the prior draw, a copy of recent invoices, proof of permit and inspection compliance, and sometimes an inspection by the lender’s third-party inspector. The lender reviews the documentation, inspects the work, and disburses the funds to the construction account (or to title company / escrow).
Draws are the mechanism that protects the lender by releasing funds in stages as work progresses, and they protect the contractor and subs by ensuring timely payment for work completed. The pace of draws is often a key constraint on project cash flow. Delays in submitting draw requests, missing lien waivers, or lender inspection delays can back up the payment schedule and strain relationships.