The majority of new construction projects are funded in whole or in part via a third-party lender—such as Alpha Funding Partners if the borrower did their research and knows we have a proven track record of providing efficient and flexible financing options for new home builds of all sizes. Understanding the draw process and knowing how to optimize every stop of the process is essential for the timely and successful completion of any construction project.
The draw request process all starts off with the draw schedule, which is a detailed payment overview for the entire construction project. These comprehensive plans are usually segmented into multiple milestones or phases meant to track the progress of the project. After the draw schedule has been finalized, the project manager is responsible for submitting a detailed report of the work completed at predetermined points along the project timeline. This information should be supported by a wide variety of documentation to prove that the stated work has indeed been performed. Providing a clear and traceable paper trial via which the lender is able verify the progress being made will speed up the draw request process and expedite the entire project timeline. As long as all of this substantiating paperwork checks out, the payment will be released quickly—which is referred to as the draw request.
The draw request is much more than just another mere form. It’s a collection of important documents handed over to the lender that is essentially requesting that they release the funds required for the new build project. This critical assortment of paperwork is intended to provide clear and verifiable evidence of work that has been successfully completed and justify the expenses associated with completing the remainder of the project. The draw totals are dependent on the cost analysis conducted for each individual milestone—and the more detailed and thorough you can be in the documented completion evidence the smoother the process will be for everyone involved.
Obviously, one of the most essential inclusions in the draw request is the invoices and receipts for the work performed over the course of the draw period. Ensure that you are proactive and collect, organize and record all subcontractor and supplier receipts and invoices prior to submitting a draw request as justification for the funding you need. Whether the request is to cover the work performed or the materials acquired, they should be adequately detailed and organized to justify the amount you are requesting. Having all of your invoices in hand and presented in a manner that is easy to follow and confirm will save the lender time reviewing the request and get you the money you need to stay on tract more quickly.
When it comes to streamlining the draw request process, thorough and consistent record-keeping cannot be emphasized enough. It is useful to keep an up-to-date schedule of values—which is a document that lays out line-by-line all tasks that need to be achieved along with an anticipated budget for each. All line items should be reviewed and updated accordingly after every draw request. Actively tracking work via the schedule of values assists in keeping track of how much money has been expended related to the amount of work that has been finished to date—which makes it easier to stay on budget and on time.
Put simply, every time a lender is forced to request further documentation to justify a particular draw request or has to independently verify whether certain details are accurate, payment is delayed for everyone involved in the project—and these delays can quickly spiral out of control. It takes time for payments to trickle down the payment chain to all contractors and subcontractors working on the project. So, when you are preparing a draw request for your new home build, it is critical to have all the requisite information accounted for and properly organized.