Construction loans fund a project as value is created over time. Draws are the mechanism that connects the approved construction budget to verified progress on the property. Because Landlord Lending works with multiple investment-property lenders, exact credit, leverage, experience, liquidity, draw, property and documentation guidelines can vary by lender, program and overall deal strength.
Why Construction Loans Use Draws
Construction proceeds are typically released in stages rather than fully advanced at closing because the collateral is being created over time.
The Draw Process
The borrower completes eligible work, submits a draw request and supporting documentation, and the lender verifies progress before releasing approved funds.
Budget Line Items
Draws are commonly tied to approved budget categories or completion phases. Work that falls outside the approved budget may require a change order or amendment before it can be funded.
Inspections and Verification
Construction lenders often use third-party inspectors, internal review or other verification methods to confirm that reported work has been completed before funds are released.
Interest and Outstanding Balance
Interest on a construction loan typically accrues on the outstanding drawn balance rather than the full commitment. Draws that are not yet released do not accrue interest until funded.
Keeping the Project Moving
Investors need working capital between draw requests. Contractors may expect payment before a draw is verified and released, which creates a timing gap that available liquidity must bridge.
How Landlord Lending Helps
Landlord Lending helps real estate investors evaluate ground-up construction financing based on the project, experience, budget, leverage and exit strategy, including the path to long-term rental financing.
Explore the Ground Up Construction Loan.
Related: Ground-Up Construction Loans: The Complete Guide · How Lenders Evaluate Construction Budgets
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Request Loan TermsFrequently Asked Questions
Do construction lenders fund the entire loan at closing?
Generally, construction proceeds are released over time through draws rather than all at once.
What triggers a construction draw?
Completed eligible work, a draw request and lender-required verification typically support a release.
Can a draw be denied?
A lender may delay or adjust a draw if work is incomplete, documentation is missing, costs are ineligible or the project deviates from the approved plan.