Construction Loan Draws
The staged payments a construction lender releases to a borrower as a project progresses, with each draw released only after a lender's own inspector verifies that the corresponding work is actually complete.
Why it matters
A construction lender doesn't hand over the full loan amount up front, since that would let a borrower walk away with financing before the building exists to secure it. Draws tie the money to verified progress instead, which protects the lender but also means a project's cash flow depends on inspections happening on schedule.
On a real project
A developer's construction loan is split into six draws tied to milestones: foundation complete, structure topped out, building enclosed, rough-in complete, and so on. Before each draw releases, the lender sends its own inspector to verify that milestone was actually reached before wiring the next payment.
Who this matters most to
A Construction Accountant tracks draw requests against the lender's schedule and reconciles what's been billed against what work is actually in place, since a draw request that outruns real progress creates a problem for everyone on the project.
Where this goes wrong
A borrower submits a draw request for a milestone that's only partially complete, hoping the lender's inspection won't catch the gap. The lender's inspector rejects the draw, the payment is delayed, and the project's own cash flow, which was counting on that draw to pay subcontractors, falls behind.