How construction loan draws work

One draw, from invoice to funding

1. The work gets done and billed. The general contractor submits a pay application for the month, often on the AIA G702 and G703 forms, and other vendors send invoices.
2. You assemble the draw package. The draw request, the pay application and invoices, and lien waivers from everyone paid with the previous draw.
3. The lender's inspector visits. They confirm the work billed is actually in place.
4. The lender reviews the package. Amounts are checked against the approved budget line by line, and anything missing sends the package back.
5. Title is brought down, where required. Some lenders fund through the title company. In the construction draw process of WHEDA, Wisconsin's housing finance agency, the title company disburses once an endorsement is issued to the title commitment.
6. The draw funds, and you pay the contractors who are still waiting.

How long it takes, depending on who you ask

Rabbet's 2026 State of Construction Finance Report asked both sides. Developers reported a median of 10 days from draw request to funding. Lenders reported a median of 6.5 days for the same process. On first review, no developer in the survey said a request had been sent back for more documents, while 25% of lenders said they had sent requests back. Asked where a delayed draw package sits, 92% of lenders pointed to the borrower correcting errors or missing documents.

Both can be true at once. The cleaner the package, the more the lender's number applies to you.

What a draw schedule looks like

A draw schedule is the plan of those monthly requests over the life of the loan, and keeping track of each one is what construction draw management software does. Built from the free pro forma, the example's $9,651,349 loan funds in 21 draws. None come in the first 7 months, because the equity pays first. The first arrives in August 2026, the largest is $1,210,694 in November 2026 at the peak of construction, and the last 9 are interest only, funding the loan's own interest during lease-up.

Equity first is how the example is set up. It is a term of each loan, though: some lenders fund pro rata, with equity and loan sharing each draw. If yours does, the draw dates and amounts change, and so does the interest.

The cash you carry between draws

Draws reimburse work already done. A BiggerPockets post on hard money draws put it plainly: "you are funding the work out-of-pocket first and getting paid back second." Someone has to pay the subcontractors before the draw arrives: you, a credit line, or the subcontractors themselves, by waiting.

In the example's busiest month, October 2026, $1,192,048 of work is billed. At the developers' median of 10 days, that is roughly how much cash the project needs for the gap. At a month, it is the same amount for three times as long. The peak month is the one to plan for, and it comes after the equity is gone.

Retainage, holdbacks and the interest reserve

Retainage is a share of each payment held back from the contractor until the work is complete, to make sure it gets finished. It lowers what you pay out each month and creates a balance owed at the end.

A holdback is money the lender keeps back from a draw, for example until a missing lien waiver arrives or an inspection issue is fixed.

The interest reserve is the part of the loan that pays the loan's interest. In the example it comes to $918,230, funded by the draws and repaid from the sale. When it runs out before the project is sold or refinanced, the interest has to be paid in cash. The construction loan interest calculator works it out for any loan amount.

Keeping draws clean

If the lenders' answer in that survey is right, most delays are paperwork, and paperwork is the part you control. Track every budget line with what is committed, spent and still to come, so each request ties back to the approved budget. Collect lien waivers when you pay, not when the lender asks. Send each request on the same day of the month. The construction budget template and the draw schedule template cover the first part; the Excel draw schedule includes a draw request sheet that lists costs to date for every budget line and subtracts the equity paid in and earlier draws to get the amount to request.