Glossary Term

Draw Schedule

What is a Draw Schedule?

A draw schedule is a detailed timeline that outlines the disbursement of loan funds during a construction or renovation project. It aligns funding with specific milestones, ensuring that funds are released incrementally as work progresses. Draw schedules are critical for managing cash flow, maintaining accountability, and ensuring that projects stay on track.

How Draw Schedules Work

When a construction or renovation loan is approved, the borrower and lender agree on a draw schedule that specifies when funds will be disbursed. Here’s how the process typically works:

  • Milestone-Based Disbursements: Funds are tied to specific project milestones, such as site preparation, framing, plumbing, or final inspection.
  • Inspections: Before releasing funds, the lender may require a third-party inspection to verify that the work has been completed according to the agreed-upon plans.
  • Retainage: Some lenders withhold a portion of each draw (e.g., 5-10%) until the project is complete to ensure all work is finished to satisfaction.

    • Components of a Draw Schedule

    A well-structured draw schedule typically includes:

  • A list of construction phases or tasks (e.g., site preparation, foundation, roofing).
  • The percentage of the total loan allocated to each phase.
  • The estimated completion date for each milestone.
  • Inspection requirements and criteria for fund release.

    • Benefits of a Draw Schedule

    Draw schedules provide several advantages for borrowers and lenders alike:

  • Cash Flow Management: Ensures that funds are available when needed while avoiding unnecessary upfront disbursements.
  • Accountability: Helps monitor project progress and ensures that funds are used appropriately for each phase of construction.
  • Risk Mitigation: Protects lenders by reducing the likelihood of unfinished projects or misuse of funds.

    • Challenges of Draw Schedules

    While beneficial, draw schedules can also present challenges:

  • Delays in inspections or approvals can slow down fund disbursements and stall progress.
  • Disagreements between borrowers and lenders about milestone completion can cause friction.
  • Unexpected project changes or cost overruns may require adjustments to the schedule.

    • Draw Schedules with LYNK Capital

    At LYNK Capital, we work closely with borrowers to create clear and effective draw schedules tailored to their project needs. Our process ensures timely disbursements and accountability, allowing you to focus on bringing your project to life. Contact us today to learn more about how our lending solutions can support your construction or renovation goals.

     
     
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    *LYNK Capital Fund, L.P. operates as LYNK Investments, LLC in the state of Texas.
    LYNK Capital offers fix & flip loans, new construction loans, bridge loans, and DSCR rental loans to real estate investors.
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    Private Lending Glossary - Draw Schedule