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

Most real estate investors understand fix-and-flip loans, but ground-up construction financing is a different animal. The biggest source of confusion is the draw schedule: the line-item plan that controls how and when your lender releases money. Get the draw schedule wrong and your project stalls. Get it right and you keep crews paid, materials on site, and your build on track.

This guide walks through how draw schedules work in 2026, what lenders are looking for at each stage, and the practical moves that keep your project funded through completion. If you are ready to fund your next build, you can start an application in two minutes at slatefinancial.io/apply.

What a Draw Schedule Actually Is

A draw schedule is a written agreement between you and your construction lender that breaks the total loan amount into staged disbursements, called draws. Each draw is tied to a specific milestone in the build. The lender does not hand you the full loan at closing. Instead, you fund construction in stages, and the lender reimburses you (or pays vendors directly) after the work for each stage is verified.

This protects the lender, but it also protects you. A well-structured draw schedule keeps the project moving in measurable chunks and prevents money from being spent on the wrong line items.

Why Lenders Use Draw Schedules Instead of a Lump Sum

Construction loans are higher risk than acquisition loans because the collateral does not yet exist. The land is there, but the building is not. Lenders use draws to keep their loan-to-value position in line with completed work at every stage. If a project gets abandoned at 40 percent complete, the lender has only released 40 percent of the funds, not the full balance.

The Typical Draw Schedule for a Spec Home or Investment Build

Most ground-up construction loans for single-family spec homes, small multifamily, or light commercial use a five to eight draw structure. The exact breakdown depends on the lender, the build, and your experience as a builder, but here is a common framework:

Draw 1: Site Work and Foundation (typically 10 to 15 percent)

This draw covers clearing, grading, excavation, utility stub-ins, foundation pour, and footings. Inspectors will verify the foundation is poured to plan and cured.

Draw 2: Framing and Roof Dry-In (typically 15 to 20 percent)

Once the structure is framed, sheathed, roofed, and the building is weather-tight, draw two is released. This is one of the most critical inspection points because everything that follows depends on a true and square frame.

Draw 3: Rough Mechanicals (typically 15 to 20 percent)

Plumbing, electrical, and HVAC rough-ins are inspected and signed off. This is also where many lenders verify that subcontractors have been paid for prior phases through lien waivers.

Draw 4: Insulation, Drywall, and Interior Prep (typically 10 to 15 percent)

Insulation passes inspection, drywall is hung and finished, and the home moves from a shell into something recognizable.

Draw 5: Finishes and Fixtures (typically 15 to 20 percent)

Cabinets, flooring, trim, paint, lighting fixtures, plumbing fixtures, and appliances are installed. This is the most expensive material phase for most spec builds.

Draw 6: Final and Certificate of Occupancy (typically 10 to 15 percent)

Final inspections, punch list completion, and the certificate of occupancy. The final draw is often held back until the CO is in hand and all lien waivers are collected.

Some lenders add interim draws for landscaping, driveways, or pool installation on higher-end builds. Others combine phases on smaller projects. The principle is the same: money follows verified completion.

How a Single Draw Actually Gets Released

The mechanics of pulling a draw catch new builders off guard. Here is the typical flow:

1. You submit a draw request to the lender, usually through a portal or a standardized form. The request lists the line items being claimed and the dollar amount.
2. You submit supporting documents, including paid invoices or unpaid invoices being requested for direct payment, lien waivers from subcontractors who were paid in prior draws, and photos of completed work.
3. The lender orders an inspection. A third-party inspector visits the site, verifies the work claimed, and reports a percent-complete figure for each line item.
4. The lender reviews and funds the draw. If everything checks out, the funds are wired to you or directly to vendors. If there is a gap between what you claimed and what the inspector verified, the draw is adjusted.

The turnaround on a typical draw is three to seven business days, depending on inspector availability and how clean your documentation is. Funding velocity is one of the things real builders care most about, which is why working with the right capital partner matters. You can get matched at slatefinancial.io/apply.

Interest Reserve and Carry Costs

Construction loans accrue interest only on the funds that have been drawn, not the full approved amount. Many lenders include an interest reserve in the loan itself, which means a portion of the loan covers the monthly interest payments during construction so you do not have to pay out of pocket while the project is mid-build.

Interest reserves are not free money. They come out of your overall budget. But for builders without significant operating cash, they are often the difference between completing a project and stalling out at draw four.

What Lenders Underwrite Before They Even Open a Construction Loan

Draw schedules are operational mechanics. The bigger question is whether a lender will write the construction loan in the first place. Underwriting typically reviews:

• Builder experience. First-time builders face tougher terms and tighter draw schedules. Builders with three or more completed projects in the last 36 months get more flexibility.
• Plans, permits, and budget. A complete cost breakdown by line item, signed plans, and permits in hand (or a clear permit timeline) are baseline requirements.
• As-completed appraisal. The lender orders an appraisal that values the property at projected completion, not as-is. The loan-to-cost and loan-to-value ratios are calculated from this number.
• Borrower liquidity. Most lenders want to see liquid reserves equal to six to twelve months of interest payments plus any expected cost overrun cushion.
• Exit strategy. Are you selling on completion, refinancing into a DSCR rental loan, or refinancing into a traditional mortgage? The exit drives loan structure.

Loan-to-Cost vs Loan-to-Value

Construction lenders quote two numbers. Loan-to-cost (LTC) is the loan amount divided by total project cost (land plus construction). Loan-to-value (LTV) is the loan amount divided by the as-completed appraised value. A typical construction loan might cap at 85 percent LTC and 70 percent LTV, whichever is lower. Knowing both numbers before you submit a project is the difference between a clean approval and a stalled deal.

Common Reasons a Draw Gets Delayed or Denied

Even with a strong project, draws get held up. The most common reasons:

• Missing lien waivers. Lenders will not release a new draw until prior subcontractors have signed lien waivers confirming they have been paid.
• Inspector disagreement on percent complete. If you claim 75 percent on drywall but the inspector finds only the master bedroom finished, the draw is reduced.
• Permit or inspection lapses. A failed framing inspection or an expired permit can pause all draws until resolved.
• Title issues. Mechanic’s liens filed by an unpaid sub can stop draws entirely until the lien is released.
• Budget overruns. If you blow through a line item, the lender may require you to bring fresh equity before continuing.

How to Run a Clean Draw Process

The builders who fund cleanly through completion are the ones who treat draw documentation as part of the build, not an afterthought. Practical habits that work:

• Keep one folder per draw with invoices, photos, lien waivers, and inspection reports.
• Pay subcontractors promptly and collect signed lien waivers within 48 hours.
• Schedule inspections the moment a phase is complete, not when you need cash.
• Track actual spending against the budget every week, not at the end of each draw.
• Communicate change orders to the lender in writing before the work happens, not after.

None of this is glamorous, but it is the difference between a project that funds on rails and one that stalls at draw four with subcontractors walking off the site.

Bottom Line: Get Your Capital Structure Right Before You Pour the Foundation

Ground-up construction is one of the more rewarding asset classes in real estate, but it is also one of the most operationally demanding. The draw schedule is the spine of your financing, and how well you manage it determines whether your build hits market on schedule and on budget.

If you are planning a spec build, a small multifamily, or a custom construction project for resale or refinance, the right construction loan can make the project work. Funding is subject to lender approval and project underwriting, but Slate Financial works with construction lenders across Florida, Texas, Georgia, the Carolinas, and beyond.

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

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