Investor guide. Updated September 2026
How do construction draws work on a fix and flip or construction loan?
On a fix and flip or construction loan the renovation budget is not paid out at closing. It is held back by the lender and released in draws, usually 3 to 8 per project, after you complete a stage of work and an inspector confirms it. You submit a draw request with photos and invoices, an inspection happens within 2 to 5 business days, and funds are wired 1 to 3 days after that. Most draws are reimbursements, so you need working capital to fund each stage first.
The process, step by step
- Budget becomes the draw schedule. At closing your line-item scope of work (demo, framing, plumbing, electrical, kitchen, baths, flooring, exterior, and so on) is the schedule. Each draw is a percentage of each line completed.
- You do the work and pay for it. Materials and labor for the stage come out of your working capital or the contractor's terms.
- You request the draw. Through the lender's portal or by email: which lines are complete, what percentage, photos, invoices or lien waivers where required.
- Inspection. A third-party inspector visits or reviews photos, typically within 2 to 5 business days. Some capital sources allow app-based photo inspections for small draws.
- Funding. The approved amount, less the draw fee, is wired 1 to 3 business days after the inspection is approved. Total request-to-wire is usually 5 to 10 business days.
Numbers to expect
| Item | Typical 2026 practice |
|---|---|
| Number of draws | 3 to 8, at your pace; some sources set a minimum draw of $5,000 to $10,000 |
| Draw fee | $150 to $300 per inspection |
| Turnaround | 5 to 10 business days from request to wire; 3 with the fastest sources |
| Advance versus reimbursement | Most draws are reimbursement for completed work. Some sources advance materials on invoice or fund a first draw at closing for demo and permits. |
| Interest on the holdback | Charged on drawn funds only with many sources; charged on the full loan from day one with others. Ask. |
| Contingency | 5% to 10% of budget, released last or on documented overruns |
| Final draw | Often held until a final inspection, and on new construction until the certificate of occupancy |
Why draws stall, and how to avoid it
- Requesting lines that are not finished. A 60% complete kitchen is a 60% draw on that line. Requesting 100% gets the whole draw cut back and re-inspected.
- Work outside the approved scope. If you add a bathroom, get the budget change approved before you build it. Unapproved work is not reimbursed.
- Missing paperwork. Invoices, lien waivers from subs, and permits for permitted work. Keep them in one folder from day one.
- Inspector access. Someone has to let the inspector in. A lockbox saves a week.
- Changing contractors mid-project. Tell the lender. A new GC usually means a new budget review.
Working capital math
Because draws reimburse, plan to float one stage at a time. On a $120,000 rehab with five draws, that is roughly $25,000 to $35,000 of cash or contractor credit in motion at any moment. Investors who run out of working capital in the middle of a project do not get more loan; they get a stalled project with interest running. Budget the float alongside the down payment and reserves.
How 316 Capital handles draws
316 Capital is a private lending and capital advisory firm. Draw speed and interest-on-drawn-funds are two of the biggest differences between our institutional capital partners, and we place rehab-heavy projects with the partners that turn draws fastest. Your point of contact stays on the file through every draw, and draw requests and documents run through the 316 Vault app.
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Request terms Estimate pricingCommon questions
Do I get the renovation money at closing?
No. The renovation budget is held back and released in draws as work is completed and inspected. Some capital sources fund a small first draw at closing for permits and demolition.
How long does a draw take?
Five to ten business days from request to wire is typical: two to five days for the inspection and one to three for funding. The fastest sources do it in three days with photo-based inspections.
Do I pay interest on the rehab budget before I draw it?
Depends on the capital source. Many charge interest only on funds actually drawn. Others charge on the full loan amount from closing. On a large budget the difference is thousands of dollars, so confirm which structure you are quoted.
Can I get reimbursed for materials I bought before closing?
Usually not for work done before the loan closes. Materials purchased before closing but installed after are sometimes eligible with receipts. Ask before you buy.
What happens if I go over budget?
Overruns are the borrower's responsibility. A contingency line in the budget covers small ones. For larger overruns some capital sources will re-underwrite and increase the loan if the completed value supports it, but plan as if they will not.
316 Capital is a private lending and capital advisory firm. We arrange business-purpose real estate financing through institutional capital partners; loans are not available for owner-occupied primary residences. Figures on this page are typical market ranges as of September 2026 and are not an offer or commitment. Every quote is transaction-specific and subject to underwriting. Contact info@316cap.com or +1 (617) 546-4817.