Ground-Up Construction Financing in 2026: How Draw Schedules Actually Work

Building from dirt is a different animal than buying a finished house. With a flip or a rental purchase, the lender funds the deal at closing and you go to work. With ground-up construction, the money comes to you in stages, tied to the progress you make on the build. That staged release is called a draw schedule, and understanding it is the difference between a project that flows and one that stalls out halfway through framing.

If you are a real estate investor or builder planning a ground-up project this year, here is how construction financing and draw schedules actually work, what lenders look for, and how to keep the cash moving. When you are ready to line up funding, you can apply in about two minutes.

What Ground-Up Construction Financing Is

A ground-up construction loan funds the building of a structure on a vacant or cleared lot. Unlike a standard purchase loan, the lender is underwriting a project that does not exist yet. They are betting on your plans, your budget, your builder, and the future value of the finished property, often called the as-completed or after-repair value.

Because the asset is being created in real time, the lender does not hand you the full loan amount on day one. Instead, they hold the construction funds in a controlled account and release them in pieces as the work gets done. This protects the lender from funding a half-built project, and it protects you from blowing the budget before the roof is on.

How a Draw Schedule Works

A draw schedule is the agreed-upon plan for releasing construction funds in stages. Each stage, or draw, is tied to a completed phase of the build. A typical residential draw schedule might look like this:

Common Draw Stages

• Draw 1 – Lot and foundation: Site prep, excavation, footings, and the poured foundation.
• Draw 2 – Framing: The skeleton goes up, including walls, floor systems, and roof structure.
• Draw 3 – Dry-in and mechanicals: Roofing, windows, plus rough plumbing, electrical, and HVAC.
• Draw 4 – Interior finishes: Insulation, drywall, cabinetry, flooring, and fixtures.
• Draw 5 – Final completion: Final trim, landscaping, punch list, and certificate of occupancy.

The number of draws varies by lender and project size. Some lenders use five draws, others use seven or more for larger builds. What stays consistent is the principle: you complete a phase, the lender verifies it, and then the next chunk of money is released.

The Inspection and Reimbursement Cycle

Here is the part that catches first-time builders off guard. Most construction draws are reimbursement-based, not advance-based. That means you or your contractor typically pay for a phase of work first, then request the draw to get repaid.

The cycle usually goes like this. You complete a phase, you submit a draw request with supporting documents like invoices and lien waivers, the lender sends an inspector to confirm the work is actually done, and then the funds are released, often within a few business days. Knowing this cycle exists helps you plan your cash flow so you are never waiting on money you needed last week. If you want help structuring a project that keeps draws moving, you can start an application here.

Interest-Only Payments During the Build

One feature that makes construction loans manageable is that you generally pay interest only on the funds that have actually been drawn, not on the full loan amount. If your total construction loan is approved for a large sum but you have only drawn the foundation and framing money so far, your interest payment is based on that smaller drawn balance.

This keeps carrying costs lower in the early months when less capital is deployed, and it ramps up naturally as the project progresses and more funds are released. It is one of the reasons construction financing is structured the way it is rather than as a single lump-sum loan.

What Lenders Look For on a Ground-Up Deal

Construction lending carries more moving parts than a standard purchase, so lenders tend to focus on a few key areas:

• A detailed budget and scope: A line-item construction budget, often called a schedule of values, showing where every dollar goes.
• Realistic timeline: A build schedule the lender can map the draws against.
• Experience or a qualified builder: Either a track record of completed projects or a licensed general contractor on the team.
• Skin in the game: Lenders typically want the borrower to contribute toward land or soft costs rather than financing one hundred percent.
• Supportable as-completed value: Comparable sales or an appraisal that backs up the finished value of the property.

The stronger your plans and your budget, the smoother underwriting goes. Sloppy numbers are the fastest way to slow a deal down. Funding is always subject to lender approval, so presenting a clean, complete package matters.

Construction-to-Permanent vs Construction-Only

There are two broad structures to know. A construction-only loan covers the build and is paid off when you either sell or refinance into a separate long-term loan. A construction-to-permanent loan rolls the construction phase and the long-term mortgage into one package, converting to permanent financing once the build is complete and the property is occupied.

Which one fits depends on your exit. If you are building a spec home to sell, a construction-only or short-term product may make sense. If you are building a property to hold and rent, a construction-to-perm structure can save you a second closing. A good funding partner will help you match the structure to your plan.

Common Mistakes That Stall a Build

• Underbudgeting contingency: Material and labor surprises happen. A contingency line in the budget keeps a surprise from becoming a crisis.
• Requesting draws too early: If the inspector finds the phase incomplete, the draw gets delayed. Request when the work truly meets the milestone.
• Ignoring lien waivers: Missing documentation from subs can hold up a release. Keep paperwork tight from draw one.
• No cash buffer: Because draws reimburse after the fact, builders who run lean on operating cash get squeezed between phases.

How Slate Financial Helps

At Slate Financial, we work with real estate investors and builders to match ground-up projects with construction lenders across Florida, Texas, Georgia, South Carolina, and beyond. We help you organize the budget, the timeline, and the draw structure so your funding request is clean before it ever hits an underwriter. We do not lend directly, and all funding is subject to lender approval, but we know what a strong construction package looks like and how to present yours.

Whether you are pouring your first foundation or running multiple builds at once, the goal is the same: keep the capital flowing so the project never waits on the money.

Ready to Build?

Ground-up construction is one of the most rewarding plays in real estate when the financing is set up right. Get your budget and timeline in order, understand your draw schedule, and line up a funding partner who can move.

Ready to fund your next deal? Apply in 2 minutes at slatefinancial.io/apply.

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