A draw schedule is the documented plan that divides a construction loan into periodic disbursements, specifying what percentage of the total loan is released at each milestone and what triggers each draw. The schedule is agreed upon by the lender, builder, and owner before construction begins and becomes part of the loan commitment.
There are three common draw schedule shapes. Front-loaded schedules release a larger percentage early (e.g., 25% after foundations, 20% after framing) to support early labor-intensive phases and material purchases. Equal schedules divide the loan equally (e.g., 4 draws of 25% each) regardless of work phase. Milestone-driven schedules tie each draw to specific construction milestones (excavation, foundation, rough-in, drywall, trim, finish) and release funds only when the lender’s inspector confirms work is complete.
The draw schedule is a critical project control document. It dictates cash flow timing, creates accountability for progress, and protects the lender by ensuring funds are released only as work advances. A poorly designed draw schedule can force the contractor to fund work out of pocket early, straining cash flow. A well-designed schedule balances the lender’s risk with the contractor’s funding needs.