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

If you’re a spec home builder, developer, or fix-and-flip investor moving into ground-up construction, one term will define your entire project timeline: the draw schedule. Getting construction financing wrong — or misunderstanding how draws work — is one of the fastest ways to stall a project, lose a contractor, and blow your budget. This guide breaks down everything you need to know about ground-up construction loans, how draw schedules function, and how to position yourself for approval in 2026.

Ready to explore your financing options today? Apply in 2 minutes at slatefinancial.io/apply — funding subject to lender approval.

What Is a Ground-Up Construction Loan?

A ground-up construction loan is short-term financing used to fund the building of a new structure from an empty lot or a complete teardown. Unlike a standard mortgage or hard money fix-and-flip loan — which are tied to an existing structure’s value — a construction loan is underwritten based on the as-completed value (ACV) of the finished project and the borrower’s construction budget.

These loans are typically:

• 12 to 24 months in term
• Interest-only during the build phase
• Sized at 70%-85% of total project costs or 65%-75% of ACV (whichever is lower)
• Funded in stages rather than as a lump sum — this is where the draw schedule comes in

How Draw Schedules Actually Work

A draw schedule is a predetermined timeline of disbursements tied to construction milestones. Instead of receiving all your loan proceeds upfront, you receive funds in “draws” — each one triggered when an inspector verifies that a specific phase of construction is complete.

A typical draw schedule for a single-family spec home might look like this:

Draw 1: Foundation and Footings (15%-20% of loan)

Released after the foundation is poured and inspected. This covers your concrete work, footings, slab, and any underground utility rough-ins. Lenders want a third-party inspection confirming the foundation is code-compliant before releasing funds.

Draw 2: Framing and Rough Mechanicals (20%-25% of loan)

Once the structure is framed, sheathed, and rough plumbing, HVAC, and electrical are roughed in, you request draw two. The inspector checks that the framing matches your approved plans and that rough-in work is complete.

Draw 3: Drywall and Insulation (15%-20% of loan)

After insulation is in and drywall is hung (not necessarily finished), draw three is released. Many builders use this stage to pay finish subcontractors who require deposits before starting.

Draw 4: Interior Finishes (20%-25% of loan)

Flooring, cabinetry, trim, fixtures, and paint. This is often the largest draw because it covers the highest-cost cosmetic work. The lender inspector verifies substantial completion of finishes before releasing funds.

Draw 5: Certificate of Occupancy and Final Completion (10%-15% of loan)

The final draw is released only after a CO is issued. Some lenders hold a 5%-10% retainage until this point specifically to ensure completion.

Draw timing varies by lender — some require 10-14 business days for inspection scheduling and fund release. Build that lag into your contractor payment schedule or you will face gaps.

What Lenders Look at Before Approving a Ground-Up Loan

Ground-up construction loans carry more risk than purchase or rehab loans, so underwriting is more thorough. Here is what most private and institutional lenders will evaluate in 2026:

Experience

First-time builders face harder terms. If you have completed at least 2-3 ground-up or major renovation projects, document them — final appraisals, sale records, or proof of CO. Experienced builders often access better LTCs and faster approvals. First-timers can still qualify by pairing with an experienced general contractor with a strong track record.

The Construction Budget

Lenders want a line-item budget with contractor bids, not ballpark estimates. Vague budgets are the single biggest reason construction loan applications stall. Include materials, labor, permits, architect fees, carrying costs, and a contingency reserve of at least 10%.

The As-Completed Appraisal

An independent appraiser will review your plans and comps to estimate what the finished property will sell or rent for. Lenders size your loan against this number. If comparable sales in your market are soft, your available loan amount shrinks — regardless of your build cost.

Lot Ownership or Purchase Contract

You typically need to own the lot free and clear (or have significant equity) or have a contract to purchase it. Some lenders will finance the lot acquisition simultaneously with the construction loan — called an acquisition-plus-construction product.

Liquidity and Reserves

Most construction lenders want to see that you can cover 3-6 months of interest payments and unexpected cost overruns from your own reserves. Thin liquidity is a fast path to loan denial.

Common Draw Schedule Problems and How to Avoid Them

Even experienced builders run into draw schedule friction. Here are the most frequent issues:

• Inspection delays: Lenders use third-party inspectors who may not be local to your market. Schedule inspections 1-2 weeks before you expect to hit a milestone — not after.
• Contractor front-loading: Some GCs want large upfront payments that exceed your first draw. Negotiate payment schedules aligned with the draw timeline before you sign a construction contract.
• Cost overruns hitting your contingency: If your contingency reserve is exhausted, the lender may require you to inject cash before releasing additional draws. Keep that reserve intact as long as possible.
• Change orders without lender approval: Significant scope changes may require a modified appraisal and lender sign-off. Unauthorized scope changes can freeze your draws.

Need help structuring your construction financing before your next project breaks ground? Apply at slatefinancial.io/apply — our team reviews options from private lenders and bridge lenders across FL, TX, GA, and SC. Funding subject to lender approval.

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

There are two main product structures for ground-up construction financing:

Stand-Alone Construction Loan

A short-term loan (12-24 months) that covers the build only. At completion, you refinance into a permanent loan (conventional, DSCR, or portfolio) or sell. This gives you flexibility — you are not locked into a permanent loan product before you know what rates will do.

Construction-to-Perm (C2P)

One loan that transitions from construction draws to a permanent mortgage at CO. You lock your permanent rate and terms upfront, which can be advantageous in rising rate environments. Downside: you are committed to one lender’s permanent product regardless of how rates move during the build.

For spec homes intended for sale, stand-alone construction loans are almost always the better structure — you have no need for a permanent mortgage if you plan to sell on completion.

What Markets Are Active for Ground-Up Construction Lending in 2026?

Private and bridge lenders remain active in Sun Belt markets with strong population growth: Florida, Texas, Georgia, and the Carolinas are seeing the most consistent lending appetite for ground-up projects. Coastal markets in the Northeast and California are experiencing tighter lender conditions due to longer absorption timelines and higher carry costs.

For spec home builders in FL, TX, GA, or SC with a solid lot position and construction budget, capital is available — the bottleneck is almost always documentation and deal presentation, not the market itself.

How to Get Funded Faster: Packaging Your Construction Loan Application

The fastest way to close a construction loan is to arrive over-prepared. Have these documents ready before you apply:

• Executed purchase contract or deed for the lot
• Full set of architectural plans and specifications
• Line-item construction budget with GC bids (not estimates)
• GC’s license, insurance certificate, and prior project list
• Your personal financial statement and liquidity documentation
• List of comparable completed sales in the target area (your comp set)
• Prior project list if you have previous ground-up or major rehab experience

Lenders who receive a complete package close in 2-3 weeks. Lenders who receive a partial package ask for more documentation, and the clock resets every time.

Ready to Fund Your Next Ground-Up Project?

Ground-up construction financing is available for builders and developers who know how to package a deal. Draw schedules, milestone inspections, and as-completed valuations are all manageable when you understand the process — and partner with lenders who do this every day.

Ready to fund your next deal? Apply in 2 minutes at slatefinancial.io/apply. Our team works with private lenders, bridge lenders, and community banks across Florida, Texas, Georgia, and South Carolina. All funding subject to lender approval — terms vary by project, borrower profile, and market.

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