Draw schedules tied to milestones
A draw schedule divides the construction budget into stages, each releasing when its work is verifiably done. A typical residential schedule: deposit/mobilization (capped by California law at $1,000 or 10%, whichever is less), foundation, framing and roof, rough mechanical-electrical-plumbing, insulation and drywall, finishes, and a final draw at completion — usually five to eight draws on a remodel or ADU. Renovation-loan programs (HomeStyle, CHOICERenovation, 203k) run the same way with the renovation funds held in escrow at closing.
The schedule is negotiated up front, and it should mirror how the project actually builds. A schedule that front-loads money invites trouble; one that starves the middle of the project forces the contractor to float six figures. Balanced is the goal — and it's a document worth reading before you sign either the loan or the construction contract.
Inspection and release mechanics
When a milestone completes, the contractor submits a draw request: an itemized invoice against the schedule, photos, and conditional lien releases. The lender sends an inspector (or uses the appraiser) to verify the milestone on site, title gets updated on some programs, and funds release — typically three to seven business days after a clean request. Renovation-loan draws add one wrinkle: the lender pays from the escrowed renovation funds, often by two-party check or direct disbursement to the contractor.
Why contractor-lender coordination matters
Most draw friction is paperwork friction. Lenders want bids in specific formats, scopes that map to their milestone categories, W-9s and license documentation on file, and lien releases in the exact form their title company accepts. A contractor who has never worked a financed project learns all of this on your timeline — with your crew waiting. This is the practical reason BARC's lending desk and build team sit in one company: the bid is written in lender format from day one, draw requests go out the day a milestone completes, and the release cycle stays measured in days, not weeks.
Common draw delays and the fixes
- Milestone 90% done, not 100% — inspectors don't release partials; fix: sequence work so draw milestones close cleanly instead of five things at 90%
- Missing or wrong-form lien releases from subs — fix: collect conditional releases with every sub invoice, not at draw time
- Undocumented change orders that made the draw not match the schedule — fix: written change orders priced and lender-notified before the work
- Inspector scheduling lag — fix: request the inspection the day the milestone completes, not after the paperwork is assembled
- Contingency confusion on renovation loans — the 10–15% contingency is real money in the escrow; unused, it typically pays the loan down at completion
Owner responsibilities
Your job in a draw process is small but non-delegable: sign draw requests promptly (many programs require owner sign-off), never pay the contractor outside the schedule (it breaks the lender's accounting and your legal protection), keep decisions ahead of the schedule so milestones don't stall on selections, and hold the final draw until the punch list is genuinely done and the completion certificate is signed. Do those four things and the money side of construction becomes boring — which is exactly what it should be.
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Frequently Asked Questions
Do I pay interest on the whole loan from day one?+
On true construction loans, interest typically accrues only on funds as they're drawn, so early-project payments are small and grow with progress. Single-close renovation loans work differently — the full loan closes up front — but the renovation funds sit in escrow rather than your pocket. Your loan officer models the payment curve either way; make them show you.
My contractor wants a big payment ahead of the schedule. Is that normal?+
No — and in California the initial deposit is legally capped at $1,000 or 10%, whichever is less. Payments ahead of completed work remove your leverage and violate most loan programs' terms. A contractor who needs your money to fund another project's bills is showing you the exit; take it.
Are draws faster with hard money?+
Usually, yes. Private lenders run leaner draw processes — often a site photo review and days-not-weeks turnarounds — which is part of what the higher rate buys on flip projects. The lien-release discipline stays the same; skipping it risks mechanic's liens no matter who the lender is.
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