In one sentence
The agreed plan for advancing construction loan proceeds against work completed, tied to a line item budget and verified before each disbursement.
The longer version
Each draw is a small closing. The borrower submits a request tied to budget line items, the inspector or fund control agent verifies work in place, lien waivers come in from the contractor and subcontractors, and title is updated before funds release. Retainage is held back on each advance.
The discipline is cumulative. A draw funded without a current lien waiver or an updated title date-down leaves a gap that only appears later, usually when a mechanics lien is filed or when the file is examined. Draw packages are among the most commonly incomplete records in construction lending.
Common questions
- What is in a draw package?
- The draw request tied to budget lines, the contractor's application for payment, inspector or fund control verification, lien waivers from the contractor and subcontractors, and a title date-down endorsement.
- What is retainage on a draw?
- A percentage withheld from each advance, commonly ten percent, released after completion and the expiry of lien filing periods. It gives the contractor an incentive to finish and the lender a cushion.
- Why is a title date-down needed at each draw?
- To confirm no intervening liens or encumbrances were recorded since the last advance, protecting the lender's priority for the new money.
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