For a builder on a construction loan, a draw that comes back costs more than a week. Trades wait to be paid, the next stage waits on the trades, and the next draw starts late. Most returned draws aren't disputes about the work. They're a percentage the inspector didn't agree with, a total that doesn't tie, or a missing lien waiver.
A draw that's measured honestly, adds up and arrives with its backup is usually approved the first time. Here's how to prepare one. It's how Draw Requests builds the package, and the same steps work in a spreadsheet.
What the lender checks
| Check | What they look at | What gets a draw returned |
|---|---|---|
| Progress | The inspector's report against your percent complete on each line | Billing ahead of the work, such as roofing at 100% with the ridge still open |
| The budget | Every line against the approved budget plus approved change orders | A line billed past its budget, or a change order the lender hasn't seen |
| The figures | Previous draws, this draw, holdback and balance to finish | Previous draws that don't match what was funded, or totals that don't add up |
| Backup | Invoices, lien waivers or a statutory declaration, change orders, photos | A billed line with no invoice, or a missing waiver from a major trade |
| Funds left | Whether the undrawn loan still covers the cost to finish | Contingency used up halfway through, so the loan looks short |
That last check matters more than it looks. If the remaining loan won't cover the remaining work, many lenders ask the borrower to put in the difference before they fund anything else.
Before the first draw: set up the budget properly
The budget, often called the schedule of values, is what every draw is measured against, so the time to get it right is before the loan closes. See schedule of values for how one is built.
- Don't front-load. Putting extra value into early lines such as site work and foundation gets cash in sooner, but inspectors and lenders see it, and the later lines end up short when the expensive finishing work arrives.
- Split big lines. "Mechanical $104,000" is hard to measure. Plumbing, electrical and HVAC as separate lines, each with rough-in and finish, are easy.
- Keep the contingency as its own line. Move money out of it by change order, so the lender can see what's left.
- Agree the paperwork up front. Ask the lender for their draw form, their backup checklist, the holdback rate, whether they pay for stored materials, and how many days the inspection takes.
A monthly draw routine
1. Walk the site on the same day each month
Pick a date, say the 25th, and estimate percent complete on each line while you're standing in the building. The inspector will do the same thing, so be at least as conservative as they will be.
2. Add approved change orders to their lines
An approved change adds to the budget of its line before you bill against it. Unapproved changes stay out of the draw until they're signed and the lender has a copy. Our guide to change orders homeowners don't dispute covers how to get them signed quickly.
3. Work out the figures for each line
Completed to date is the line's budget times percent complete. This draw is completed to date less what was billed before. Balance to finish is the budget less completed to date. Check that previous draws match what the lender actually funded, not what you asked for.
4. Take holdback
If the loan has holdback (called retainage in the US), take it on this draw's work on every line, change orders included, and show the running total. In Canada, provincial lien laws commonly require 10% holdback. The holdback and retainage calculator works it out for a whole draw, and retainage (holdback) explains the rules.
5. Attach the backup
One invoice behind every billed amount, a lien waiver or statutory declaration for the period from you and the main trades, and photos of anything the inspector might not see on the day, such as plumbing before the drywall goes up.
6. Send it, then track it
Send the package on the same day each month and book the inspection at the same time. Note when it was sent, inspected, approved and funded. After a few draws you'll know how long your lender takes, and you can tell your trades when they'll be paid.
A worked example
Here's Draw 3 for a fictional project: a custom home at 62 Thistledown Road built by Quarrystone Homes, with a $640,000 construction budget and 10% holdback. Framing finished this month, the roof is on, and the windows and mechanical rough-ins are underway.
| Line | Budget | % complete | Completed to date | Previous draws | This draw |
|---|---|---|---|---|---|
| Permits and fees | $18,000 | 100% | $18,000 | $18,000 | $0 |
| Site work and foundation | $72,000 | 100% | $72,000 | $72,000 | $0 |
| Framing | $96,000 | 100% | $96,000 | $57,600 | $38,400 |
| Roofing | $34,000 | 100% | $34,000 | $0 | $34,000 |
| Windows and doors | $41,000 | 50% | $20,500 | $0 | $20,500 |
| Plumbing | $38,000 | 40% | $15,200 | $0 | $15,200 |
| Electrical | $36,000 | 40% | $14,400 | $0 | $14,400 |
| HVAC | $30,000 | 35% | $10,500 | $0 | $10,500 |
| Insulation and drywall | $52,000 | 0% | $0 | $0 | $0 |
| Interior finishes | $148,000 | 0% | $0 | $0 | $0 |
| Exterior finishes | $55,000 | 0% | $0 | $0 | $0 |
| Contingency | $20,000 | 0% | $0 | $0 | $0 |
| Total | $640,000 | 43.8% | $280,600 | $147,600 | $133,000 |
The summary the lender reads:
| Draw 3 summary | Amount |
|---|---|
| Work this draw | $133,000 |
| Holdback: 10% of $133,000 | −$13,300 |
| Payment due | $119,700 |
| Holdback to date: 10% of $280,600 | $28,060 |
| Balance to finish: $640,000 − $280,600 | $359,400 |
The windows line is the one to watch. All the windows were delivered this month, and it would have been easy to bill the line at 80% or more. But the lender on this loan doesn't pay for stored materials, and only half the windows are in. Billing 50% matches what the inspector will see, so the draw goes through, and the rest of the line is billed next month once they're installed.
The contingency is untouched and the undrawn budget still covers the work left, so the lender's "funds left" check passes too. With invoices for each of the six billed lines and lien waivers from the framer, roofer and the three mechanical trades, there's nothing to send back.
Why draws come back
- Billing delivered materials as installed. Unless the lender has agreed to pay for stored materials, wait until they're in.
- Rounding up to the next stage. "Drywall 50%" when the boards are hung but not taped invites the inspector to cut it to 30%.
- Previous draws that don't match the lender's records. If the lender cut last month's draw, start this month from what they funded.
- Change orders billed before they're approved, or approved but never sent to the lender.
- A missing waiver from one trade. One missing page can hold up the whole draw, so collect waivers as invoices come in, not on the day you send.
- Holdback left off change orders or worked out on the total instead of this draw's work.
Frequently asked questions
How does a construction loan draw work?
The loan budget is split into line items. Each month, or at set stages, the builder sends a draw request showing how far along each line is. The lender usually sends an inspector to confirm the progress, checks the backup, and then releases the amount due, less any holdback.
How long does a construction draw take to fund?
Often between a few days and two weeks after the lender receives a complete request, depending on when the inspection can be booked and the lender's own review. Incomplete backup and percentages the inspector disagrees with are the most common causes of delay.
What backup does a lender want with a draw request?
Usually the invoices for the work billed, lien waivers or a statutory declaration from the builder and the main trades, approved change orders, and sometimes photos. Some lenders also update the title search before each draw. Ask for the lender's checklist at the start of the loan.
Can I draw for materials that are delivered but not installed?
Only if the lender agrees to pay for stored materials. Those that do usually want the invoice, proof the materials are on site or in a bonded warehouse, and insurance that covers them. Otherwise, bill materials when they are installed.