What goes into a draw package

A land development draw package is the request a developer sends a construction lender to fund work already performed, and it is made of four things: a schedule of values stating each budget line, what has been funded before, what is requested now and what remains; the backup for the amount requested, usually subcontractor pay applications and invoices; evidence that the work is in place, typically an inspection or an engineer’s certification; and the lien and certification documents the loan agreement calls for. The part that takes the time is not assembling paper. It is that the developer’s cost codes and the lender’s budget lines are two different lists, and every draw has to be spoken in the lender’s.

The schedule of values is the draw

Everything else in the package exists to support a number on it. One row per budget line, and the columns are close to standard even where the form is not:

• Current budget for the line, which is the original plus whatever approved moves have touched it.
• Previously funded, the total funded on this line through the last draw.
• This period, the amount being requested now.
• Total to date, the two of them added.
• Balance to complete, the current budget less the total to date.
• Percent complete, which is a claim about the field and not about the money.
• Retainage, withheld this period and held to date.

Two pieces of arithmetic decide whether the package gets read or returned. Previously funded on this draw has to equal total to date on the last one, line by line and not merely in the total. And no line’s total to date may exceed its current budget. A line over its budget is not a rounding question to the person reviewing it. It is a request to fund something out of a bucket the loan agreement does not have, and it holds up the package rather than the line.

Two lists of cost codes, and the mapping between them

This is where the month actually goes.

A developer codes cost the way the work is bought and the books are kept. Mass grading, storm, sanitary, curb and gutter, base and paving, each with its own code, because that is how the subcontracts are let and how an invoice gets posted. The lender’s budget is the one attached to the loan agreement, set at closing and coarser on purpose: sitework, utilities, streets, soft costs, contingency, interest reserve.

Neither list is wrong. The developer’s has to be granular enough to manage a subcontract. The lender’s has to be stable enough to be a covenant. What is needed is a mapping, written once, saying which cost codes roll into which lender line. It is a durable asset and worth building carefully, because the alternative is rebuilding it from memory every month against a deadline.

Two ways of getting it wrong are worth naming. A cost mapped to a line that is nearly funded out requests money from a bucket that is empty while the correct bucket sits untouched, and the fix arrives a draw cycle later. And a mapping that changes quietly between draws makes previously funded stop tying to the last package, which is the first check the reviewer runs and the one that sends the whole thing back.

How retainage works

Retainage is a portion of an approved amount withheld from payment and held until a release condition is met. Mechanically it does three things, and each of the three is somewhere developers lose money or accuracy.

It reduces cash paid without reducing cost incurred

The work was done and the amount was approved. The money is simply held. So the retained amount is cost on the day it is approved and belongs in actuals then, accrued as a liability, not recognised on the day it is finally released. Record only the cash and every actual is understated by the amount held, every percent complete derived from it is wrong in the same direction, and the error compounds for as long as the job runs.

It exists on two sides at once

There is retainage the lender holds from you, computed on the draw, and retainage you hold from each subcontractor, computed on their pay application. Those are separate ledgers. They may sit at similar rates and they are not the same money, they do not necessarily release on the same event, and netting them in your head is how a developer ends up funding a subcontractor’s release out of pocket while the matching money is still sitting behind the bank.

It releases on a condition, not on a date

The condition lives in the contract: substantial completion, final acceptance, a maintenance period, a bond release. How much may be held, for how long, and what has to happen before it comes out depend on the agreement and on the law where the work sits. Those rules vary, so the rate belongs in your contracts and the interpretation belongs with your counsel. What is portable is the mechanic: withheld from payment, accrued as cost, released on a condition somebody has to actually satisfy and evidence.

The backup a lender asks for

The loan agreement is the list that counts, and it is worth reading once carefully rather than inferring the list from whatever came back last month. With that said, a package is usually assembling some combination of the following.

• Subcontractor pay applications and invoices covering the amount requested, summing to it exactly.
• Evidence that the previous draw was paid out to the parties it was funded for.
• Lien waivers from the parties being paid, conditional on payment for the current period and unconditional for the prior one, in whatever form the agreement specifies.
• An inspection report or an engineer’s certification that the work being billed is in place.
• A borrower’s certificate or sworn statement, signed.
• Copies of any change orders behind a line that has moved since the last draw.
• A title date-down endorsement, where the agreement calls for one.

What makes the assembly painful is not the number of documents. It is that they come from different people on different schedules and they have to agree with each other to the dollar. An invoice that lands after the schedule of values was built is not a missing document. It is a package that has to be rebuilt.

One line through a draw

A draw is a schedule document too

Percent complete is a claim about the field, and the schedule is the other record of the same claim. When the two disagree, the draw is usually the optimistic one, because it is the one with money attached. Reconciling them before the package leaves is cheaper than reconciling them in front of an inspector.

Two schedule facts belong in the same conversation as the draw. Funding pace against remaining work says whether the facility runs out before the job does. And the interest reserve is consumed by time rather than by progress, so a schedule slip spends it whether or not any dirt moved that month.

Why draws come back

Almost every returned draw is one of a short list of mechanical things. Previously funded does not tie to the last package. A line requests past its budget. The backup does not sum to the amount requested. The inspection does not support the percent complete claimed. Waivers for the prior period are missing. A change order is reflected in the numbers and not in the file.

None of those are judgement calls, which is the useful part. Every one of them can be run as a check before the package leaves, by the person who built it, in the order the reviewer is going to run them.

Written alongside PadFlow, which keeps a land development schedule, budget and draws on one record.