Draw Schedules Explained: Getting Paid as the Rehab Progresses

A draw schedule is the plan for how your renovation money gets released. The lender holds the rehab budget after closing and pays it out in pieces, each one tied to work that has been completed and checked. Set it up well and your contractor stays paid. Set it up poorly and the job stalls waiting on cash.

Three common ways to structure draws

Lenders tend to use one of these approaches, or a blend:

• By milestone. Funds are released when a defined stage is done, such as demo, rough-ins, drywall, finishes.
• By line item. You draw against specific budget lines as each one is completed, backed by invoices.
• By percent complete. An inspector estimates how much of the total job is finished, and you draw that share of the budget.

Ask which method your lender uses, how many draws are allowed and whether there is a minimum draw size before you build your contractor's payment terms.

What gets checked before money moves

Before releasing a draw, lenders commonly look for:

• Photos or an inspection showing the work is actually done
• Invoices or receipts that match the amount requested
• Work that lines up with the approved scope of work
• Permits in place for work that needs them
• Lien waivers from contractors or suppliers who were paid with earlier draws

A lien waiver is a contractor's signed statement that they have been paid and will not file a lien against the property. Many lenders ask for them to make sure draw money reached the people doing the work.

Match your contractor's pay to your draws

The most common cash crunch happens when a contractor expects payment on a different rhythm than the lender releases funds.

Example (illustrative only): Your contractor wants $15,000 every two weeks. Your lender releases funds only when each milestone is finished, which might take three to four weeks per stage. You will need cash to bridge those gaps, or you will need to renegotiate the contractor's schedule to match milestones. Sort this out before demo day.

What slows draws down

• Blurry or incomplete photos
• Invoices that do not add up to the request
• Work done out of sequence, such as finishes installed before rough-in inspections
• Scope changes without an approved change order
• Contractor disputes that block access for the inspector

Habits that speed things up

Photograph progress as it happens. File invoices by budget line. Request draws as soon as a stage is complete. Tell your lender early when anything in the scope changes.

What this means for you

Treat the draw schedule as part of your project plan. Know the structure, align your contractor's pay with it, keep documentation tight, and keep enough cash to float the gap between finishing work and receiving funds.

Planning your next rehab? Send RSC Private Lending your scenario and scope of work for a term sheet in 24 hours. All loans are business-purpose and subject to underwriting.