What is a Draw Schedule in Real Estate?
What is a Draw Schedule?
A draw schedule is a detailed financial plan that outlines the specific timings and amounts of funds (or "draws") that will be released to contractors over the course of a development/construction project. This schedule is used to ensure that construction funding is aligned with project milestones, helping to manage cash flow efficiently and maintain financial control.
Here’s how draw schedules generally work:
- Phased Funding: The draw schedule breaks down the total project funding into smaller, manageable installments. These are typically aligned with the completion of specific phases or milestones of the construction project, such as the foundation, framing, roofing, or final finishes.
- Verification of Work: Before each draw is released, there usually is a verification process to ensure that the work completed so far meets the agreed standards and milestones. This might involve inspections by the lender, developer, or an independent third party.
- Control Over Budget: The draw schedule helps prevent overspending by matching the release of funds to the progress of the construction, providing a systematic approach to funding based on actual progress.
This method of financing is commonly used in large-scale real estate development projects where long-term investments are substantial and the risk management of project funds is important.
