What is a draw schedule? A plain definition

What is a draw schedule? A draw schedule is the agreed-upon plan for how and when a construction lender releases loan money to a builder. Instead of handing over the full loan at closing, the lender disburses funds in a series of payments called draws. It releases each draw only after a crew finishes and verifies a specific phase of work. As a result, the money tracks the build. The contractor gets paid as the crew completes milestones, and the lender keeps control over funds nobody has earned yet. This is the core of how construction lending differs from a standard mortgage. There, the borrower receives the full amount up front.

This staged-funding model touches enormous sums of money. The U.S. Census Bureau estimated total construction spending in April 2026 at a seasonally adjusted annual rate of $2,172.4 billion, with residential construction alone at $909.9 billion. Construction loans finance much of that residential and commercial work, and nearly every one of those loans runs on a draw schedule. So the draw schedule is not optional back-office paperwork. It is the mechanism that decides whether a contractor gets paid on the fifteenth of the month or three weeks later. SimplyWise built this guide for general contractors, builders, and trade subcontractors who want to protect their own cash flow.

Why the draw schedule matters to a contractor

The draw schedule matters because it controls the single most important number in any business: cash flow. A contractor on a construction loan project does not get paid when the crew finishes the work. The contractor gets paid when the crew finishes, documents, inspects, and the lender approves that work against the draw schedule. As a result, a slow or sloppy draw request can leave a builder floating tens of thousands of dollars out of pocket. The builder waits while the bank processes it. Knowing exactly how the draw schedule works is how a contractor closes that gap.

It decides when you get paid

A milestone and a verification step gate every draw. Say your framing draw keys to “framing complete and passed inspection.” The lender will not pay you for framing until the inspector signs off. A contractor who plans cash flow as if payment arrives the day the crew sets the last truss runs short. The fix is simple. Read the draw schedule before you sign the contract. Then build your own cost timeline around the actual draw triggers, not around the work calendar.

It controls retainage exposure

Most draw schedules hold back a percentage of each draw, called retainage, until the project reaches completion. As a result, even on an approved draw, the contractor takes home less than the full earned amount. The lender releases the remainder at the end. Retainage of 5 to 10 percent is common on residential and commercial work. So a contractor who ignores retainage will overestimate the cash coming in on every draw across the entire job.

It exposes underbilling and overbilling

The draw schedule maps directly to a line-item budget. If a contractor bills more than the completed work on a given line, that is overbilling. The lender or inspector will catch it at the next draw. Underbilling is the opposite problem. It quietly starves the contractor of cash the crew has already earned. As a result, the contractor who tracks completion against the draw schedule line by line keeps billing accurate. That habit also keeps the lender relationship clean.

It is the lender’s risk control

From the lender’s side, the draw schedule exists to manage risk. The lender releases money only against verified progress. That way the loan balance never gets too far ahead of the value the crew has actually built into the property. So the contractor should treat the draw schedule as a shared document, not an obstacle. A clean, well-documented draw request makes the inspector’s and the loan officer’s job easy. That is the fastest path to getting paid on time.

How a construction draw schedule works

A construction draw schedule breaks the total loan into a set of disbursements. Each one ties to a defined stage of the build. The borrower and lender agree on the milestones and the dollar amount for each before the loan closes. Then, as the project progresses, the contractor completes a phase and submits a draw request. The lender verifies the work and releases the funds. The cycle repeats for each draw until the crew finishes the project and the final draw closes out the loan. Because the loan stays interest-only during construction, the borrower pays interest only on the funds actually drawn, not on the full loan commitment.

Draws are tied to milestones

Each draw corresponds to a clear, verifiable construction milestone. A typical single-family draw schedule keys its disbursements to a set of phases. These run from foundation and framing through dry-in, mechanical, electrical, and plumbing rough-in, interior finishes, and final completion with a certificate of occupancy. Good schedules word the milestones so an inspector can stand on the site and confirm whether the crew finished each one. Vague milestones cause disputes. Specific, inspectable milestones keep draws moving.

The lender verifies progress

Before releasing any draw, the lender verifies that the crew actually completed the claimed work. Most lenders send a third-party inspector to the site. The inspector confirms progress against the draw schedule and confirms that the prior draw funds went into the project. The inspection protects the lender and, indirectly, the contractor, because it documents completed value at each stage. So the contractor should make the site inspection-ready before requesting the draw: work visible, debris cleared, and the completed scope obvious.

The Schedule of Values is the backbone

Underneath the draw schedule sits a detailed line-item budget called the Schedule of Values. On commercial and many residential projects, contractors bill against it using two standard forms from the American Institute of Architects. These are the AIA Document G702 Application and Certificate for Payment and the AIA Document G703 Continuation Sheet. The G702 summarizes contract value, work completed to date, retainage, prior payments, and the current amount due. The G703 breaks that summary down line by line against the Schedule of Values. Together, the G702 and G703 are the documentation language that lenders, owners, and architects expect on professionally run projects.

Interest accrues only on drawn funds

A construction loan runs interest-only during the build. Interest accrues only on the funds the lender has disbursed. So a borrower with a $400,000 construction loan who has drawn $120,000 pays interest on $120,000, not on the full $400,000. The draw schedule carries a direct financing benefit. By drawing only what each completed phase needs, the borrower minimizes interest carry during construction. This is one reason lenders and borrowers both prefer milestone-based draws over a single large advance.

A sample draw schedule

A draw schedule varies by lender, loan product, and project. Still, a typical single-family ground-up build runs 4 to 6 draws keyed to the major construction phases. The table below shows a representative 5-draw structure. The percentage column shows how lenders commonly allocate the loan across phases, though every lender sets its own split. So treat the figures as an illustrative model, not a fixed rule. Always work from the schedule in your own loan documents.

The shares above are illustrative and vary widely by lender and region. Some lenders run 6 or more draws on larger or more complex builds, and others compress to 4. So the only schedule that matters for your project is the one in your loan agreement. Confirm the exact milestone language and the exact dollar allocation for each draw before the first day of work. Do it before the crew pours the foundation, not after.

How to request a construction draw

Requesting a draw is a documentation exercise. The cleaner and more complete the draw request, the faster the lender approves it. That speed means the contractor gets paid sooner. The process below is the standard sequence for a milestone-based draw on a construction loan. A contractor who runs this process the same way every time earns a reputation with the lender for clean draws. That reputation compounds into faster approvals over the life of the relationship.

1. Confirm the milestone is genuinely complete

   Before requesting the draw, walk the work. Confirm the milestone in the draw schedule is genuinely finished and would pass an objective inspection. This avoids the most common cause of draw delays: requesting a draw on work that is 90 percent done. Get the last 10 percent finished first.

2. Assemble the documentation

   Pull together the draw request package. Include the application form (often AIA G702 with a G703 continuation sheet against the Schedule of Values) and updated cost-to-complete figures. Add lien waivers from the subs and suppliers you paid on prior draws. Include the receipts and invoices that prove where prior draw money went.

3. Match the request to the Schedule of Values

   Bill each line against the Schedule of Values based on actual percent complete. So if framing is the trigger and the crew finished framing, bill the framing line to 100 percent. Bill partially complete lines honestly. Overbilling a line invites a correction and slows the whole draw.

4. Submit and schedule the inspection

   Submit the draw request to the lender and coordinate the site inspection. Make the site inspection-ready before the inspector arrives: completed scope visible, debris cleared, prior-phase work easy to confirm. A clean site speeds the sign-off.

5. Account for retainage and reconcile

   Expect the lender to hold retainage (commonly 5 to 10 percent) from the approved draw. Reconcile the funds you received against the amount you earned, then log the retainage. Update your records so your next draw request and your cash forecast both stay accurate.

Draw schedule vs payment schedule vs Schedule of Values

People use these three terms loosely, but they are not the same thing. A draw schedule governs how a lender releases loan funds. A payment schedule governs how an owner pays a contractor. A Schedule of Values is the line-item budget that both run against. As a result, a single project can have all three documents in play at once. A contractor needs to know which one controls a given payment. The table below sorts them out.

On an owner-financed project with no construction loan, there may be no draw schedule at all, only a payment schedule and a Schedule of Values. On a lender-financed project, the draw schedule and the payment schedule often line up closely because both follow the same construction milestones. So the contractor should read all three documents on any project that has them. Confirm they do not contradict each other on timing or amounts.

Common draw schedule problems and how to avoid them

The same handful of problems cause most draw delays and disputes. The usual suspects are milestone disputes, missing documentation, retainage surprises, and lien-waiver gaps. A contractor who designs the workflow to defend against each one keeps draws moving and keeps cash flowing. Each problem below comes with a defense built into the process.

Milestone disputes

A draw stalls when the contractor believes a milestone is complete and the inspector disagrees. The defense is specific, inspectable milestone language that both sides agree on before work starts. Pair that with a habit of finishing the milestone fully before requesting the draw. Then there is nothing left to argue about when the inspector arrives.

Missing or sloppy documentation

The lender bounces back any draw request that misses lien waivers, receipts, or a properly filled G703, which costs days. The defense is a standard draw-request checklist that runs the same way every time. Then the package is complete on the first submission and the lender has no reason to delay.

Retainage surprises

A contractor who forgets that the lender holds back 5 to 10 percent from each draw runs short on cash mid-project. The defense is to model retainage into the cash forecast from day one. Then you expect the held-back amount, plan for it, and collect it cleanly at the end of the job.

Lien-waiver gaps

Many lenders require conditional or unconditional lien waivers from subs and suppliers as a condition of the next draw. The defense is to collect waivers as you pay each sub and supplier, not all at once at draw time. Then the waiver package is ready when the draw request goes out. A single missing waiver never holds up the whole draw.

Build accurate estimates that feed a clean draw schedule

A draw schedule is only as accurate as the budget underneath it. If the original estimate misjudges material or labor cost on a phase, the draw for that phase will not cover the actual spend. Then the contractor eats the gap or fights for a budget revision mid-job. So the cleanest draw schedules start with the cleanest estimates. The Schedule of Values that the draw schedule runs against is, at its core, a detailed estimate broken into line items.

SimplyWise Cost Estimator uses photo-to-estimate intelligence and LiDAR room scanning. It turns a job site photo or a room scan into a sourced material and labor breakdown in seconds. That line-item output maps directly to the kind of Schedule of Values a draw schedule bills against. So the contractor starts the loan process with a defensible budget instead of a round-number guess. The phases in the draw schedule then rest on real numbers, which reduces the risk of a phase running short mid-build.

SimplyWise also bundles Receipts and Expenses tracking and Mileage tracking, which matters at draw time. Every draw request asks the contractor to prove where prior draw money went. A clean receipt trail is exactly what the lender wants to see. So organizing receipts by job and by line item as work happens turns the draw documentation step from a scramble into a quick export. SimplyWise Cost Estimator is free to try, with no credit card to start. A contractor can build the next estimate and test the receipt workflow before deciding whether it fits.

Sources

• U.S. Census Bureau, Construction Spending (C30), April 2026 release (June 1, 2026). Total U.S. construction spending estimated at a seasonally adjusted annual rate of $2,172.4 billion in April 2026, with residential construction at a $909.9 billion annual rate.
• American Institute of Architects, AIA Document G702, Application and Certificate for Payment. The summary cover sheet for a progress payment: contract value, work completed to date, retainage held, prior payments, and the current amount due.
• American Institute of Architects, AIA Document G703, Continuation Sheet. The line-item breakdown that itemizes the G702 against the Schedule of Values.