Ground-Up Construction Loan Draw Schedules: How They Work and How to Use Them to Build Without Running Out of Cash

You have the land. You have the plans. You have a builder lined up. What you do not have is $500,000 sitting in your bank account ready to fund a spec home from foundation to certificate of occupancy.

That is exactly what a ground-up construction loan is for — but most builders and real estate investors are surprised to learn the money does not land in your account all at once. Instead, it comes through a draw schedule: a staged release of funds tied to verified construction milestones.

Understanding how draws work is the difference between a build that runs smoothly and one that stalls at the framing stage because funds were not released on time. Here is a practical walkthrough of how construction loan draw schedules work in 2026, what lenders are looking for, and how to access capital when banks will not touch ground-up projects.

Funding subject to lender approval.

What Is a Draw Schedule?

A draw schedule is a written agreement — part of your construction loan documents — that maps each disbursement of loan funds to a specific stage of construction. Rather than wiring you the full loan amount on day one, the lender releases money in tranches as each phase is completed and verified.

Typical stages in a draw schedule look like this:

• Draw 1 — Site prep and foundation: 10%–15% of the loan, released after the foundation is poured and inspected.
• Draw 2 — Framing: 15%–20%, released after the frame is up and a framing inspection passes.
• Draw 3 — Mechanical rough-in: 15%, released after plumbing, electrical, and HVAC rough-ins are complete.
• Draw 4 — Insulation and drywall: 10%–15%, released after these systems are closed in.
• Draw 5 — Interior finishes: 15%–20%, released after flooring, cabinetry, fixtures, and trim are installed.
• Draw 6 — Certificate of occupancy (CO): 10%–15% (the holdback), released only after the CO is issued and a final inspection clears.

The exact percentages vary by lender, loan size, and project type. Some private lenders use 4-draw schedules; others use 8. What does not change is the principle: you earn each disbursement by completing verifiable work.

Why Banks Hate Ground-Up Construction (And What That Means for You)

Most conventional banks will not fund ground-up construction for private builders and investors. Here is why:

Banks lend against collateral they can value today. A lot with drawings on it is hard to value with confidence. Unfinished construction carries risk the bank’s credit committee does not want to model. If you stop building halfway through, the bank is left holding a partially framed structure that is worth less than the land alone in many markets.

Add borrower complexity — non-W2 income, an LLC, a portfolio of existing rentals — and most banks reject the file at pre-screening.

Private lenders and hard money lenders fill this gap. They underwrite the deal based on the project’s after-repair value (ARV), your builder’s track record, and the local market, not your tax returns from two years ago. Draws still apply, but the approval process is weeks, not months, and the documentation bar is far more realistic for active builders.

If you are building in Florida, Texas, Georgia, or South Carolina — markets where spec home demand is still strong — there are active private lenders funding ground-up projects right now. The fastest way to connect with them is to get pre-qualified online: slatefinancial.io/apply.

How the Draw Request Process Works in Practice

This is where a lot of first-time builders get stuck. They assume the draw is automatic. It is not.

Here is the typical draw request process:

1. You complete a construction milestone (framing, rough-in, etc.).
2. You submit a draw request to your lender — usually a one-page form with a line-item breakdown of what was completed and what was spent.
3. The lender orders an inspection — either an independent third-party inspector or a title company rep who visits the site and verifies the work is done to spec.
4. Inspection report is approved — the lender reviews the inspector’s report, confirms the milestone is met, and authorizes the disbursement.
5. Funds wire — typically 2–5 business days after the inspection is approved.

The practical implication: you will likely need to float some costs between draw disbursements. Your GC may want payment when the work is done, but the draw funds will not arrive for 5–10 days after completion. Budget for this gap and have a short-term working capital line in place to cover it. Many builders use a business line of credit alongside the construction loan exactly for this reason.

What Lenders Look at Before Releasing a Draw

Beyond the inspection report, lenders watch several factors before releasing each draw:

• Lien waivers from subcontractors: Most lenders require conditional or unconditional lien waivers from all subs paid from the prior draw. This protects the title and makes sure sub-contractors are actually getting paid rather than you pocketing the disbursement.
• Draw schedule alignment: If you are requesting draw 3 funds but the inspection shows draw 2 work is only 80% complete, the lender will not release the full draw — or may hold the request entirely.
• Budget-to-actual tracking: If you are over budget early in the build, a lender may reduce later draws or require a cost reconciliation before continuing disbursements. This is the single biggest operational risk in ground-up construction: scope creep that burns through the budget before the building is complete.
• Title continuations: Lenders check that no new mechanic’s liens have been recorded against the property between draws.

Interest-Only During Construction: How That Works

One detail borrowers often miss: on most construction loans, you only pay interest on the funds that have been disbursed, not the full loan commitment.

That means in month one, after draw 1 releases $75,000 on a $500,000 loan, you are paying interest only on that $75,000 — not on the full $500,000. Your payment grows as more draws are released. This structure keeps your cash flow manageable during the build phase.

When construction is complete, most ground-up construction loans either:

• Convert to a standard term loan (construction-to-perm), or
• Require a payoff — meaning you refinance into a conventional mortgage or DSCR rental loan, or sell the completed property.

Planning the exit before you close the construction loan is not optional. Your lender will ask for it, and your build budget should account for the financing costs at the tail end.

How to Access Ground-Up Construction Funding Now

If you have a project ready to fund and you have been turned down by a bank — or you already know banks will not touch your file — the path forward is to work with a broker who has relationships with private construction lenders actively writing these loans.

What you need to have ready:

• Purchase contract or proof of land ownership
• Architectural plans and permits (or evidence of permit application)
• Builder contract with your GC
• Detailed construction budget by phase
• ARV appraisal or comparable sales supporting your exit value

You do not need perfect credit or two years of tax returns showing W2 income. Private construction lenders underwrite the deal, not just the borrower. If the numbers work — ARV supports the loan-to-value, the builder has a track record, and the market supports the exit — there are lenders who will fund it.

Get started with a 2-minute pre-qualification: slatefinancial.io/apply. No commitment. No guarantee of funding. Just a fast read on what you qualify for and which lenders match your project. Funding is subject to lender approval.

The Bottom Line

Draw schedules are not an obstacle — they are the mechanism that keeps your lender and your contractor aligned through a 6-to-12-month build cycle. Understanding them before you close your construction loan means fewer surprises when you are in the field.

The banks that could fund your project are the ones saying no. The lenders actually writing ground-up construction loans in 2026 are private, move fast, and underwrite the deal on its merits.

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

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