How rehab loan draw schedules work

How do draws get released during a rehab loan?

A draw schedule exists to protect the lender's money, which means the borrower and contractor need to plan cash flow around inspection-triggered releases, not calendar dates.

Fits

Fix-and-flip / rehab loan with staged draws Draw-based disbursement is how a rehab lender controls risk on money it hasn't verified was actually spent yet.

Wrong tool here

Expecting the full rehab budget disbursed at closing Lenders release rehab funds against completed, inspected work, not against the budget itself, so planning cash flow around a lump sum at closing sets up a mismatch.

Lenders in the directory

No lender here publishes a rule for this

This is an underwriting judgment, not a published threshold. None of the 37 lenders in the directory states a policy on it, so there is no honest way to build a shortlist — and a list computed only from which products a lender writes would tell you nothing you could act on.

What matters here is how the file is presented rather than which lender receives it. The sections below cover that. When you are ready to approach lenders, the directory shows what each one does publish, with the date it was verified.

Open the lender directory

The basic loop

The contractor completes a phase of work, the borrower requests a draw, an inspector confirms the phase is actually done, and the lender releases funds tied to that specific phase. Then the cycle repeats for the next phase — the loan doesn't hand over rehab money ahead of completed work.

What holds a draw up

An incomplete or partially-done phase that doesn't yet match what was requested.
Inspection scheduling delays, which are often outside either party's direct control.
Change orders that weren't pre-approved before the work started.
Missing lien waivers or contractor licensing paperwork the lender requires before releasing funds.

Who fronts the money between draws

The contractor or borrower typically covers materials and labor for a phase before the draw reimburses it. The loan doesn't eliminate the need for some working capital on hand — it reimburses completed work rather than pre-funding it.

Change orders and the contingency reserve

Scope changes generally need lender approval before they're eligible for funding — starting extra work without that approval risks paying for it out of pocket. A contingency reserve, where the loan includes one, is typically the last money released, held back specifically for unplanned costs rather than the first draw drawn down.

What to have ready

A phase-by-phase scope of work matched to specific draw milestones
A contractor comfortable fronting labor and materials between draws
A process for getting change orders approved before work starts on them
Lien waivers ready to submit for each completed phase

Questions

How long does a draw take to process once requested?

That depends on the specific lender's inspection scheduling and internal review — ask directly what to expect rather than assuming a standard turnaround.

Can I get an advance for materials before work starts?

Some lenders allow a materials-only draw in specific circumstances; it isn't universal. Confirm the specific lender's policy before counting on it in the cash-flow plan.

What happens if the contractor falls behind schedule?

The draw schedule follows completed work, not the calendar, so a delayed phase simply delays the draw tied to it. It's worth confirming whether the loan's overall term has any exposure to a schedule slip.

Terms used on this page

Hard Money Loan — A hard money loan is short-term real estate financing secured by the property and underwritten mainly on its value, typically from a private lender rather than a bank.
After Repair Value (ARV) — After repair value is the estimated market value of a property once planned renovations are finished. It is the basis for most fix-and-flip and BRRRR lending decisions.