Ground-Up Construction Financing: How Draw Schedules Work (And How to Get Funded in 2026)

Building from the ground up is one of the most rewarding — and most capital-intensive — moves a real estate investor can make. Whether you are developing a single-family spec home, a small multifamily, or a commercial shell, the financing structure for ground-up construction is fundamentally different from a standard purchase or fix-and-flip loan. The biggest difference: you never get all the money at once.

That is where draw schedules come in. Understanding how construction draws work — and how lenders evaluate your project before approving each one — can be the difference between a smooth build and a project that grinds to a halt while your carrying costs stack up.

If you are planning your next ground-up project, apply at slatefinancial.io/apply and our team will match you with the right lender for your scope and timeline.

What Is a Ground-Up Construction Loan?

A ground-up construction loan (sometimes called a construction-to-permanent loan or a ground-up bridge) is a short-term financing product — typically 12 to 24 months — that funds the cost of building a new structure on raw or cleared land. Unlike a purchase loan that pays out in full at closing, a construction loan disburses funds in stages tied directly to verified progress on the job site.

Most ground-up lenders will fund:

• Land acquisition (in whole or in part, depending on LTV)
• Soft costs: permits, architectural plans, engineering, surveys
• Hard construction costs: foundation, framing, MEP (mechanical, electrical, plumbing), finishes
• A contingency reserve (typically 5-10% of hard costs)

Total loan amounts generally range from 65% to 85% of the total project cost (land + build), and lenders cap exposure at a percentage of the completed appraised value (ARV or “as-completed value”) — commonly 65-70% LTV on completion.

How Draw Schedules Actually Work

A draw schedule is a pre-agreed payment plan that ties loan disbursements to construction milestones. Here is a simplified example for a $500,000 build (hard costs only):

Each draw request triggers an inspection — either by the lender’s in-house inspector or a third-party inspector they hire. The inspector verifies that the claimed work is complete before the lender wires the next tranche. This protects the lender from over-disbursement and protects you from borrowing more than you have actually spent.

Draw Timing and Your Cash Flow

The single most common shock for first-time ground-up borrowers: inspections take time. Most lenders require 5 to 10 business days to schedule an inspection and process the draw request after you submit it. That means your GC needs to carry payroll and material costs until the draw clears.

Sophisticated investors factor this into their contractor agreements — typically requiring GCs to operate on a 2-week float. If your GC cannot float expenses for even a short window, that is a project-management risk, not just a financing risk.

What Lenders Evaluate Before Approving Ground-Up Financing

Ground-up construction is the highest-risk product category in private real estate lending. Lenders know that incomplete buildings have near-zero liquidation value. Because of that, underwriting is more rigorous than on a fix-and-flip or rental refinance. Here is what they look at:

1. Experience

Most private lenders require at least 1-3 completed ground-up or substantial rehab projects as a track record. If you are a first-time builder, expect to either partner with an experienced developer or accept tighter LTVs and a higher rate. Some lenders will work with first-timers who have a strong GC with verifiable project history.

2. The Construction Budget

Lenders will line-item your budget against their own cost databases. Costs that are significantly below market are a red flag — not a green one. An artificially low budget suggests the project will run over, requiring a mid-construction refinance or, worse, a stalled job site. Come in with a detailed, realistic budget sourced from signed GC bids.

3. GC Qualification

Your general contractor will be vetted almost as closely as you are. Lenders want to see a licensed, insured GC with a verifiable portfolio of completed projects similar in scope to yours. A strong GC relationship is one of the fastest ways to compress approval timelines on a ground-up deal.

4. As-Completed Appraisal

Before funding, the lender orders a “subject-to” appraisal that values the completed project based on your plans and specs. This drives the LTV ceiling. If the appraiser comes in lower than your pro forma, you may need to bring more equity to the table or value-engineer your finishes. Never submit for financing without running your own comps first.

5. Permits in Hand

Most lenders will not fund until permits are pulled. The permit process is the biggest timeline wildcard in ground-up development — municipalities in high-growth markets like Florida, Texas, and Georgia can take 3 to 9 months. Starting the permit process before you finalize financing is standard practice for experienced developers.

Construction-to-Perm vs. Stand-Alone Construction Loan

One strategic choice every ground-up borrower faces: should you use a construction-to-perm loan that automatically converts to a long-term mortgage at certificate of occupancy, or a stand-alone construction bridge that you refinance separately once the building is complete?

Construction-to-perm: One closing, one set of closing costs, rate is locked at origination for both phases. Simpler if you plan to hold the property as a rental. The downside: perm lenders are often more conservative and may require full-doc income qualification.

Stand-alone construction bridge: More flexible, especially for spec-build-and-sell strategies. You can shop the permanent or exit financing after completion, when the asset has a verifiable market value. More closing costs overall, but often faster to close the initial loan and a better fit for investors who will sell at CO rather than hold.

If you are unsure which structure fits your exit strategy, start your application at slatefinancial.io/apply and we will walk through the options with you.

Common Pitfalls That Derail Ground-Up Projects

Underestimating Soft Costs

Permits, architectural drawings, engineering, surveys, utility hookups, and impact fees can easily total 10-15% of hard construction costs. Borrowers who exclude soft costs from their loan request often run out of capital before the foundation is poured.

No Contingency Reserve

Weather delays, material price increases, and scope changes are not exceptions in construction — they are the rule. Lenders require a contingency reserve for a reason. If your budget is already stretched to 100% of your equity, you have no runway when (not if) something costs more than planned.

Choosing the Wrong Lender for the Asset Class

Many fix-and-flip lenders do not do ground-up. Many conventional mortgage lenders do not do private construction. Working with a broker who has active relationships with lenders in your specific product category — ground-up residential, ground-up commercial, or construction-to-perm — saves weeks of back-and-forth with lenders who will ultimately pass.

Slow Draw Requests

Every day your GC is waiting on a draw is a day of carrying costs with no progress. Develop a rhythm: as soon as a milestone is 80% complete, begin preparing your draw request documentation (photos, lien waivers, invoice summary) so you can submit the moment the milestone closes. Funding subject to lender approval and inspection verification.

How Slate Financial Can Help You Get a Ground-Up Deal Done

Slate Financial works with a network of private lenders and family-office capital sources that are actively funding ground-up residential and light commercial construction in 2026. We specialize in matching borrowers to lenders based on their project type, experience level, and state — not just their credit score.

Here is what that means for you:

• We know which lenders have experience requirements that match your track record
• We know which lenders move fastest on construction draw approvals
• We know which lenders allow first-time ground-up borrowers with strong GC partners
• We know which markets are seeing the most active private lending right now

The application takes about 2 minutes and there is no impact to your credit. Funding is subject to lender approval, project review, and standard underwriting criteria.

Ready to fund your next ground-up deal? Apply in 2 minutes at slatefinancial.io/apply — our team will match you with lenders who are actively funding ground-up projects in your market.

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