How it works
Construction finance commonly releases money in stages as work progresses. Lenders review costs, contractor arrangements, permits, contingency, and the project’s repayment or takeout plan. Draws may depend on inspections or other evidence.
Where it can fit
Cash timing is central: suppliers and contractors may require payment before a draw can be released. Model that gap and consider retention, change orders, and interest during construction.
Look closely at the trade-offs
Cost overruns and delays can require extra equity. The approval of a facility does not make every draw automatic. Confirm conditions, lien requirements, who funds overruns, and the financing available when construction finishes.
Your next-step checklist
- Detailed budget and contingency
- Permits and contractor agreements
- Draw and inspection schedule
- Completion and takeout financing
Crack this combination.
Are all construction funds always advanced on day one?
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Sources & further reading
This file draws on the following references. Product availability and requirements must be confirmed with the provider.
Levr: loan typesLevr: reviewing a debt term sheet