A draw request in construction is the formal application a borrower or contractor submits to a lender to release a portion of a construction loan after a specific phase of work is finished. Construction loans aren’t disbursed in one lump sum. Instead, the money is parceled out across the life of the project, and each parcel requires its own paperwork, verification, and sign-off. Most residential construction loans are structured around five or six draws, and each one is tied to work the lender can physically confirm has been built.
Get the submission right and funds hit your account within a week or two. Get it wrong and the project stalls while subcontractors wait to be paid.
How the Draw Schedule Breaks Down the Loan
Before construction starts, the lender sets a draw schedule that maps when money comes out and how much is released at each stage. A common residential breakdown looks like this:
- Foundation and site work, roughly 20 percent, covering excavation, grading, utility connections, and the foundation pour.
- Framing and roof, roughly 25 percent, released once the structure is weather-tight.
- Mechanical rough-in, roughly 20 percent, for plumbing, electrical, and HVAC before the walls close up.
- Interior finishes, roughly 20 percent, covering drywall, flooring, cabinetry, trim, and fixtures.
- Final completion, roughly 15 percent, for punch-list items, final inspections, and anything needed for the certificate of occupancy.
These percentages aren’t universal. Some lenders use six draws, some adjust the splits based on project scope. What stays constant is the principle: each draw corresponds to work the lender can verify in person. You can’t pull framing money before the foundation passes inspection. The staged release protects the lender’s collateral while giving you access to cash as you need it.
What Goes Into a Draw Request Package
The G702 and G703 Forms
The core of most draw requests is AIA Document G702, Application and Certificate for Payment, paired with the G703 Continuation Sheet. The G702 is the summary page where the contractor certifies total work completed to date, previous payments received, change orders, and the current amount being requested.1AIA Contract Documents. Completing G702 and G703 Forms The contractor signs and notarizes it before sending it to the architect or lender along with the G703.2AIA Contract Documents. Instructions: G702-1992, Application and Certificate for Payment
The G703 holds the detail. It breaks the contract sum into a Schedule of Values, a line-by-line budget assigning a dollar amount to every phase of construction.3AIA Contract Documents. Instructions: G703-1992, Continuation Sheet For each draw, the contractor fills in the percentage of completion on every line. If an electrical contract is $20,000 and the work is half done, that line shows $10,000 completed. Overstating completion is the fastest way to get a draw rejected, and a pattern of overbilling can raise fraud flags with the lender.
Lien Waivers
Every draw package needs lien waivers from the general contractor and subcontractors, and there are two types. A conditional lien waiver is submitted alongside the current draw and only takes effect once the payment actually clears. An unconditional lien waiver takes effect the moment it’s signed and should only be used for payments already received and verified.
Most lenders want conditional waivers for the current draw and unconditional waivers for all prior draws. The unconditional waivers prove previous payments reached the subcontractors, which protects the property owner from a mechanic’s lien filed later by a sub who never got paid because the general contractor kept the money. If you’re reviewing a draw package as the owner, the lien waivers are the documents to read most carefully.
Soft Costs and Supporting Documents
Draw requests aren’t limited to physical work. Many construction loans allow draws for soft costs like architectural fees, engineering studies, building permits, and impact fees. Eligibility depends on your loan agreement, but if the approved Schedule of Values has a soft-cost line item, you can request reimbursement through the normal process by attaching the invoices.
For hard costs, supporting documentation means subcontractor invoices and receipts for materials. If expensive materials like steel beams or custom windows are stored off-site, you’ll need to prove they’re segregated, labeled for your project, and insured. Lenders are wary of paying for materials they can’t see during the site inspection.
What Happens After You Submit
Submission usually goes through a digital construction management portal where you upload the G702, G703, lien waivers, invoices, and any inspection certificates. Smaller banks sometimes still accept email submissions to a loan officer or third-party fund administrator.
The lender runs an administrative review first. They check that signatures are present, the math on the Schedule of Values is internally consistent, lien waivers cover the right periods, and nothing is missing. A wrong date or an absent signature sends the package back. The lender wants to be sure the more expensive inspection step only happens on complete applications, so a clean submission with a cover sheet and documents in the expected order can save days.
Once the paperwork clears review, a third-party inspector or bank representative visits the site, usually within three to five business days. The inspector carries the submitted G703 and walks the property, comparing what’s on paper to what’s actually built. If a contractor claims 50 percent completion on plumbing but the inspector only sees underground rough-in, the lender adjusts the draw down to match reality. Findings are documented with photos and a written report.
Inspection fees typically run $200 to $500 for residential projects and $500 to $1,500 for commercial work. Some lenders absorb the cost, others deduct it from the draw or bill the borrower separately. On a five-draw residential project, that’s potentially $1,000 to $2,500 in fees. Confirm who pays before the first draw.
After the inspection passes and the lender gives final internal approval, funds are usually released within one to two business days, often by wire. Some lenders issue a joint check payable to both borrower and general contractor to make sure the money reaches the people doing the work. Total elapsed time from submission to money in hand generally runs one to two weeks.
Why Draw Requests Get Denied
Most denials trace back to two problems: the Schedule of Values doesn’t match what’s built, or the paperwork is incomplete. The specific triggers show up again and again:
- A vague Schedule of Values. If the SOV was thrown together loosely at loan origination, you’ll pay for it at every draw when line items don’t clearly specify what they include. Lock it down with detail up front.
- Missing or wrong lien waivers. Forgetting a subcontractor’s waiver, or submitting a conditional one when the lender wanted unconditional, is probably the single most common cause of delay.
- Overbilling. Claiming more completion than the inspector can verify. Even a 10 percent gap between reported and actual progress can trigger a hold.
- Missing permits or inspection certificates. If the current phase required a municipal inspection, the lender may want proof it passed before releasing funds.
- Undocumented change orders. If scope or cost changed but the G702 doesn’t reflect a formal change order, the numbers won’t reconcile.
The fix for almost all of these is preparation before you submit rather than scrambling after a rejection. Assume the reviewer is looking for a reason to send the package back.
What You Actually Receive
The amount you receive is less than the amount approved. Lenders hold back a percentage from each draw, called retainage, as a cushion. The industry standard on private projects is typically around 10 percent. Many states cap retainage at 5 percent on public projects, and some cap it on private work as well. On a $100,000 approved draw at 10 percent retainage, you receive $90,000 and the remaining $10,000 stays in escrow. Retainage is released after substantial completion, final inspections pass, and punch-list items are resolved.
Interest works in the borrower’s favor on this structure. Interest accrues only on what you’ve drawn, not on the full loan amount. If your loan is $400,000 but you’ve only drawn $80,000 after the first milestone, your monthly interest is based on $80,000. Each subsequent draw raises the balance and the interest payment. Most construction loans are interest-only during the build, with terms typically running 12 to 18 months, so you won’t make principal payments until the project is complete and the loan converts to permanent financing or is paid off.
That structure creates a direct financial incentive to keep draws on schedule. Delays that push past the loan term can trigger extension fees or force a refinance at whatever rate the market is offering at that moment.
Paying Subcontractors From Draw Funds
Draw money doesn’t get special tax treatment when it flows out to subcontractors. The normal IRS reporting rules apply. For payments made in 2026, you must file Form 1099-NEC for any subcontractor you pay $2,000 or more during the calendar year.4Internal Revenue Service. 2026 Publication 1099 That threshold went up from $600, the longstanding rule, for payments made after December 31, 2025.5Internal Revenue Service. Form 1099 NEC and Independent Contractors Even with the higher threshold, most construction subcontractor payments will clear $2,000 easily. Track totals by subcontractor across all draws over the year, not just within a single draw. The 1099-NEC is due to the IRS and to the subcontractor by January 31 of the following year. If you’re using backup withholding on any payments, you file a 1099-NEC regardless of amount.
One timing rule applies only to federal government construction contracts. The Federal Acquisition Regulation requires prime contractors on federal projects to pay subcontractors no later than seven days after receiving payment from the government.6Acquisition.gov. 52.232-27 Prompt Payment for Construction Contracts Private construction is governed instead by state prompt-payment statutes, which set their own timelines. If you’re a subcontractor, know which rule applies to your project and follow up the moment the deadline passes.