What is a Draw schedule?
Construction loans release funds in stages as work is completed and inspected. A typical draw schedule has 5–10 stages mapped to milestones.
Also called draw schedule, construction draws.
Draw schedule
Foundation → 15%, framing → 20%, MEP rough-in → 15%, etc.
A construction loan does not arrive as a lump sum. It is released in stages against work that has already been completed and inspected, and the schedule setting out those stages is agreed before anything funds. Each release is a draw.
That structure protects the lender, but it dictates the borrower's cash flow, and this is where projects get into trouble. Work is done first and reimbursed after, so the borrower carries the cost of each stage until the inspection clears and the funds arrive. Subcontractors who expect to be paid on completion of their stage are, in effect, being financed by the borrower for the length of that gap. A schedule with too few, too large stages makes that gap wider.
Two things are worth negotiating at the start rather than discovering later: how long an inspection and release actually takes, and what happens to a draw when a stage is substantially but not entirely complete. Most disputes on a construction loan are not about the total amount — they are about the timing of one release against a subcontractor who is already waiting.
Defined in CFPB, What is a construction loan?.
Where to read next
Ground up construction loans shows where the schedule comes from and how the draws are actually released.
What a construction draw schedule does to your cash flow is the field note on this term.
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