Draw requests, where developers or owners request funds to be dispersed from a construction loan, are an essential part of the project lifecycle. Developers will need to submit multiple construction draw requests as a project progresses and milestones are accomplished. The key steps in compiling a draw package include:
- Completed Draw Request Form (Provided by Lender). The form will often outline the funding agreement between lender and borrower, and will instigate the draw process, outlining payment requested, the parties involved, and a bird’s-eye view of the work completed.
- Invoices and receipts from contractors and suppliers. The most important component of a draw request package is invoices and receipts from contractors or suppliers who worked on your project during the draw period. Ensuring invoices and receipts provide detailed information about labor performed and materials purchased is essential for securing funds.
- Lien waivers from subcontractors. Lien waivers are conditional waivers that waive the subcontractor’s right to file a lien against the property for unpaid work or supplies. Every invoice should be submitted with a lien waiver. Lenders are highly concerned about the risk of a mechanic’s lien filed against the property, and missing lien waivers are among the most likely culprits to delay a draw.
- Change orders and approval documentation. Change orders, which allow for the addition or removal of labor or supplies from the original construction plan, must be included in your draw request. Be sure every change order provides a detailed description of the additional services or material costs accrued as necessary.
- Inspection reports. Third-party inspection reports documenting progress on the property, including on-site conditions with photographs, will be necessary to move draws forward. Lenders will rely on these to safeguard investments, providing unbiased updates on a project’s current state and compliance with regulatory requirements.
Most developers are overcomplicating draw requests by handling the process with spreadsheets and siloed email threads. Outdated draw package workflows can leave developers vulnerable to delays, errors, and ultimately lost revenue. Northspyre challenges the status quo, automating the entire draw request process, making the process auditable and stress-free.
The Average Workflow for Developers
Lenders may delay a loan draw if the document package is incomplete or materials need additional verification, and by following a few key steps, your development team can avoid potential delays. The average draw request workflow for developers should include:
- Collecting and organizing all contractor invoices. Presenting lenders with invoices is crucial, allowing for the accurate documentation of completed labor and material costs.
- Reconciling invoices against the approved budget. Keeping a project’s budget on track is important to justify future funds, keep projects on track financially, and bolster confidence with lenders.
- Gathering lien waivers from all subcontractors. Every contractor and subcontractor on a project will need to file lien waivers to guarantee a mechanics lien is not placed against the property and protect owners and lenders from financial liability.
- Documenting any change orders with proper approvals. Change orders are a common occurrence on a project, and gathering relevant information about what changes were made and the implications for the budget or schedule is essential in the draw request process.
- Preparing inspection documentation to verify completion. As your project moves through the stages of construction, you’ll need to submit third-party inspection documents to show that the construction is aligning with the draw request funds.
- Completing the lender’s draw request form. The lender’s form includes key information, such as requested draw amount, description of work completed, and a breakdown of future costs.
- Submitting the package and following up until payment. Creating a detailed request package with supporting documentation and submitting to the lender and diligently tracking process until funds are released and the project can move forward.
How to Compile Your Draw Request Faster
Outdated workflows may be slowing down your draw request project and compromising the schedule for your build. Several key steps can help you compile your drawing faster and continue to move a project quickly and confidently through the lifecycle.
1. Organize and Standardize Your Documentation
The first step your team can take to streamline the draw request process is to organize and standardize your documentation. Instead of operating in disparate email workflows or ad-hoc spreadsheets, you should centralize project data. The ability to manage your draw request documents in a central location will both mitigate the risk of key data being lost and increase transparency with project stakeholders.
Here are the documents your team should look to organize and standardize:
- Draw request form
- Cost breakdowns + anticipated cost report
- Lien waivers
- Change orders
- Schedule of values/budgets
2. Leverage Automation
Modern real estate development software can automate key steps in the process and make a major difference in your real estate development process. Northspyre is a key differentiator, not just automation, but development-specific automation syncs with how teams manage the draw request process.
Northspyre can help you centralize all real estate project data, including all invoices, proposals, contracts, etc., and aggregate all of that data into easy-to-understand dashboards and easily exportable reports. For example, the technology syncs with your current email-based workflows to capture incoming documents like invoices, contracts, proposals, lien waivers, and vendor insurance certificates, then extracts the data from those documents and queues them up for your approval. With all available project data existing in the system, draw request tools are able to view your budget, understand where financing is needed, and compile an easy-to-understand draw request.
Automation can play a key role in key steps of the draw request process, helping you cross-reference budgets with forecasts and review documents for potential errors or concerns to mitigate risk. Leveraging software to compile your draw requests can also help you verify completion on your draw packages, lowering the odds of missing paperwork or misaligned concerns. You can also get internal approvals on documents or proposed budgets with workflows in the software, allowing paperwork to get signed off on more quickly.
3. Submit on Time and Communicate Clearly
Building a positive relationship with financial stakeholders is critical for the long-term success of your commercial real estate portfolio. Moving through the construction draw request process strategically can help you establish good relationships with your capital partners and set your firm up for success. Financial lenders appreciate developers who follow and adhere to their schedules, so keeping projects moving on time and on budget is in your best interest. Each lender will likely have a preferred method for draw request submission, and using their desired format for workflows and documents can help. Open and consistent communication with lenders will also help your reputation, and delivering reports with clear and accurate information is essential.
Faster Draws. Fewer Delays. Better Outcomes.
Northspyre offers robust functionality to facilitate the draw requests, allowing you to move through the process more efficiently, prevent delays, and deliver better outcomes for projects overall. Instead of digging through emails, files, and spreadsheets at the end of every month, you can leverage the platform to easily create comprehensive and compliant reports for your financial lenders. The ability to compile accurate reports and provide selective access to 24/7 real-time updates can help you build strong relationships with financial partners and attract new lenders. The draw request process doesn’t need to be painstaking and high stress – Northpsyre’s draw-specific features allow your development firm to have an effortless draw request experience as well as positive and predictable project outcomes.
Book a demo and learn how Northspyre can supercharge your draw request process and help you deliver better outcomes across your portfolio.
