Commercial Bank Draws for Multifamily Renovation

A bank draw (or construction draw) is a disbursement of loan funds tied to completed renovation milestones. Instead of releasing the full loan amount at closing, lenders fund the project in stages as work is verified complete. Typical multifamily renovation loans include 3-5 draws over the project timeline. Each draw requires documentation, inspection, and lender approval before funds are released.

Every draw request requires: a completed draw request form, updated budget showing costs to date, invoices from contractors and suppliers, lien waivers from all subcontractors (conditional for current draw, unconditional for prior draws), progress photos, and an updated construction timeline. Missing a single lien waiver can delay funding by 2-4 weeks.

Negotiate the draw schedule before construction begins. Common structures: milestone-based (30% at demolition complete, 60% at rough-in, 90% at finish, 100% at final inspection) or percentage-of-completion. Most lenders retain 5-10% of each draw as retainage, released after final completion. Align your draw schedule with contractor payment terms to avoid cash flow gaps.

Lenders typically require a third-party inspector to verify work completion before each draw. Inspections cost $500-$1,500 per visit and are charged to the borrower. Schedule inspections 5-7 business days before you need funds. The inspector verifies that work matches the approved scope, materials meet specifications, and the percentage of completion justifies the draw amount.

The biggest mistakes: starting work before the draw schedule is finalized, failing to collect lien waivers from day one, not budgeting for soft costs (inspections, permits, architectural fees), and front-loading the draw schedule beyond actual completion. Tell Projects manages the draw process for our clients — we prepare draw packages, coordinate inspections, and ensure documentation is lender-ready on the first submission.