A draw schedule outlines the payment plan or schedule for a construction project. In most cases, it is a formal agreement between the lender, the builder, and the borrower.
Draw schedules consider critical steps in the building process, such as site preparation, utilities, framing, exterior finish, interior work, and final payment. At each point, a payment amount is specified and then made to the builder when the completion of the work is verified. There may also be a retainage amount for each step that is held until the entire project is complete. Draw schedules can also be based on the percentage completed rather than specific building steps.
For the lender and the borrower, draw schedules are used to ensure work is completed before payment is made to the builder. This approach protects their interests throughout the project. For the builder, a draw schedule provides them with funding when they need it. In this way, it assures them that the project will move forward on a timely basis.