How to use
Use this template before signing the construction loan documents to design the line-item draw schedule. The schedule is the operating contract between sponsor, GC, and lender for the next 24 months, designing it deliberately at closing eliminates 90% of mid-build draw friction.
Section 1, line-item structure
Mirror the GC's AIA G703 schedule of values exactly. Every line in the loan budget should match a line in the GC contract. Mismatches at the line-item level cause disputes at every monthly draw.
- Hard-cost line items (per AIA G703, site, structure, MEP, finishes, GC fee, GC general conditions).
- Soft-cost line items (architecture, MEP engineering, civil, environmental, permits, legal, financing, insurance, taxes, marketing, lease-up).
- Hard-cost contingency (sized 5%-10% of hard costs based on project complexity).
- Soft-cost contingency (sized 3%-5% of soft costs).
- Interest reserve (sized to projected debt service through substantial completion plus stabilization buffer).
- Operating-deficit reserve (for lease-up debt service shortfalls if not covered by interest reserve).
Section 2, retainage logic
Standard institutional retainage is 10% of each hard-cost line. Negotiate stepped retainage (10% on first 50%, then 5%) at term sheet, meaningful sponsor working-capital benefit on a long build.
- Retainage rate (10% standard; stepped to 5% after 50% complete is sponsor-friendly).
- Retainage release at substantial completion (typically half of held retainage; balance held to final completion).
- Final retainage release at completion of punch list and delivery of unconditional final lien waivers.
- Coordinate retainage between loan documents and GC contract to avoid mismatches.
Section 3, lien-waiver exchange cycle
Each draw cycle exchanges conditional waivers for the current draw against unconditional waivers for the prior draw. This is the four-form mechanic that handles the timing gap between billing and payment.
- Current draw: GC and major subs deliver conditional progress waivers covering current draw amount.
- Prior period: GC and same parties deliver unconditional progress waivers for prior period (now-paid).
- Tracking: maintain a draw-by-draw waiver log keyed by sub and amount; verify completeness before submitting draw request.
- Final completion: unconditional final waivers from GC and all known subs; lien-free completion certificate from title.
Section 4, stored-materials funding
Long-lead items (switchgear, elevators, HVAC, custom millwork) often require purchase 6 to 12 months before installation. Stored-materials funding lets the sponsor pay for them without funding out of equity.
- On-site stored materials: typically funded at 100% of invoice with on-site verification.
- Off-site stored materials at bonded supplier: typically funded at 80%-100% of invoice with bond + insurance + identification.
- Funding cap (often $1M-$5M of stored materials per cycle; negotiable based on project complexity).
- Insurance: stored materials must be insured by the supplier or sponsor; loss-payable to lender.
Section 5, lender-inspector cadence
Lender inspector visits the site before each monthly draw to validate percent-complete claims against AIA G702/G703.
- Standard cadence: monthly inspector visits with 5- to 10-day reporting turnaround.
- Sponsor-friendly tweak: quarterly inspector visits during defined low-risk periods (interior buildout, finishes).
- Inspector report drives lender funding decision; disputes resolved by lender PM with escalation to senior credit if material.
- Pre-draw coordination call (sponsor, GC, lender PM, inspector) eliminates 90% of friction.
Sample 24-month draw schedule cadence
| Phase | Duration | Draws | Notes |
|---|---|---|---|
| Mobilization + site work | Months 1-3 | 3 monthly draws | Heavier early on contingency review |
| Structure | Months 4-9 | 6 monthly draws | Largest dollar volume; tightest inspector cadence |
| MEP rough-in | Months 10-14 | 5 monthly draws | Long-lead stored materials hit here |
| Finishes + close-out | Months 15-22 | 8 monthly draws | Punch list begins; substantial completion target |
| Punch + final | Months 23-24 | 2 final draws | Final retainage release at lien-free certificate |
Section 6, change-order process
Most loan documents require lender consent for change orders above a defined threshold (often $50K-$100K individual or $500K aggregate). Smaller changes flow through contingency without lender consent.
- Threshold for individual change order requiring lender consent (typically $50K-$100K).
- Aggregate threshold for cumulative change orders (typically $500K-$1M).
- Documentation: GC change-order form, AIA G701, supporting cost backup, schedule impact analysis.
- Approval timeline: typically 5-10 business days; expedited for time-sensitive items.
- Funding: contingency-funded changes draw against contingency line; sponsor-funded changes via balancing test.