top of page

Draw Requests

​

Processing draw requests are, in my opinion, one of the worst duties of a development manager.  It is just a huge and boring time suck of paperwork. 

 

A draw request is the developer's formal request to his bank (or equity investor) for the partial release of funds of a construction loan, to pay for the current project invoices.  Developers usually submit draw requests to their bank monthly. 

​

​

Components of a Draw Request

  • Cover Sheet.  This sheet usually has a rendering picture of the project, project name, the draw request number, and the name of the developer. 

  • Cover Letter. The cover letter summarizes:

    • The original loan amount

    • The amount of money currently left in the loan to draw upon

    • The amount of money being requested in the current draw

    • The amount of funds remaining in the loan after the current draw is funded

  • Budget Tracker.  This is the most important document in the draw request.  It shows how much money you are spending on various line items in your budget, and how much money you have left to spend.  It lets the bank know if you are on budget or not. 

  • Change Orders.  Your project will inevitably have change orders that will increase the costs of some line items in the project budget.  Everyone knows you are going to have change orders on a project, which is why you carry a developer contingency in your budget.  The bank is going to want to evaluate any change orders, so include them in your draw request when the change orders hit the project. 

  • Project Invoices.  The project invoices are ordered in the draw package in the same categories as shown on the the development budget that was approved by the bank.

​

​

Miscellaneous Tips for Assembling Your Draw Request Package

  • Place a cover sheet at the front of each section of the draw package.  This helps you with assembling and organizing your PDF package.  And it helps the bank with their review because the package is clearly marked and organized. 

  • Red circle or highlight the dollar amount on each project invoice that is recorded in this month's draw spreadsheet.  This helps someone who is auditing the draw quickly find and compare the dollar amount on the invoice to the dollar amount being requested in the budget tracker.

  • I send the live Excel file spreadsheet I used to create the budget tracker as backup to the PDF package draw request.  This shows the bank you have nothing to hid and they can review the cell formulas to see how you came up with dollar amounts they may have questions about.  Let the bank's analyst reviewing your draw package spend her time answering her own math questions about your draw by looking at the formulas in the cells. 

  • Be sure to include your invoice for your monthly development fee.  In the bustle to get everyone else's invoices in the draw package so they can get paid, you may forget about your invoice.

  • Check the retainage amounts in your GC's pay app schedule of values to see if they are close to accurate.  If not, your bank may flag this in their review. 

  • Include your bank's construction period interest statement in your draw package.  Even though the bank obviously knows what interest they are charging the project monthly, it is still a project cost that needs to be recorded and accounted for in the draw package. 

  • Make sure the GC pay app in the draw package is certified and signed by your architect.  If it is not signed, the bank my hold up your draw funding until it is. 

  • If your GC is charging for a lot of stored materials in his pay app, make sure he provides backup pictures of the stored materials in the warehouse.  Your bank reviewer will likely want to see these photos.  Also, ensure your GC provides insurance certificates for the storage of that material in a warehouse. 

​

​

Liens Holding Up Draw Funding

Many times, if you get a mechanic lien filed on your property (typically by one of your GC's subs or their suppliers) the bank won't fund the current draw until the lien is cleared.  If your GC is having trouble getting a lien cleared, and it is delaying everyone else from getting paid timely, ask the bank if they will withhold 125% of the lien amount from the draw funding so that you can get your GC most of his money, and all your other consultants, vendors and contractors paid.  It is not uncommon to have a $20,000 lien hold up a $1 million draw funding.  Keeping the project free of mechanic liens is the responsibility of your GC, but the above technique helps keep the money flowing for all parties. 

​

​

Draw 0 - Loan Closing Draw Request

Not only will you submit monthly draw requests during the course of construction, you will also likely submit a draw request with your loan closing package to reimburse the developer for his pre-development costs.  This "Draw 0" funds simultaneous with your loan closing. 

 

Up until loan closing, the developer has been fronting the money for all of the pre-development costs for a project, which can easily go into the seven figures.  Those pre-development costs are a project cost, so if you have a 70% loan-to-cost ratio loan, the bank should reimburse the developer for 70% of those pre-development costs at loan closing.

​

​

Next Page: Investor Reports

​

​

​

​

​

bottom of page