The construction loan draw process
From draw request to funded, and how to record it.
Short answer: In a construction loan draw, the builder submits a draw request against the lender's approved budget, the lender's inspector confirms percent complete on site, lien waivers and invoices are checked, and the lender funds the approved amount. In the books, a draw is loan proceeds or a customer payment, never income on the day it lands.
The steps
- Lender approves a budget by line item
- Builder submits a draw request with invoices and lien waivers
- Inspector visits and confirms percent complete
- Title or lender reviews the paperwork
- Funds are released, often less any retainage
How to record it
If the loan is the builder's (common on spec homes), a draw increases the loan liability. If the client holds the loan, the draw is a customer payment against the contract. Ask your CPA to confirm your setup.
Avoid delays
Keep costs coded to the lender's budget lines all month. See our draw package checklist.
Sources
Common questions
How long does a draw take to fund?
It depends on your lender and the inspection schedule. Ask your lender for their timeline.
Who orders the inspection?
Usually the lender.
Do you submit draws?
No. We prepare the package. You submit it.
Related
By John Mos, Founder. Updated . We do not give tax or legal advice. Please ask your CPA or attorney.
See where your margin goes, house by house.
Tell us about your homes and your books. If we are a fit, we start with a $750 Job Cost Checkup: written findings and a fixed quote in 10 business days, credited to your first month if you sign up.