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Tag: contractor payments

  • How Do Construction Loan Draws Work?

    Quick answer

    A construction loan draw is a payment from your lender that releases funds as work progresses on your project. Your lender inspects the work, reviews documentation, and approves payment based on what has actually been completed. Most residential projects use 5-8 draws spread across the construction timeline, though the exact schedule depends on your loan agreement and lender requirements.

    Your lender approved $500,000 for your home construction, but they don’t hand you the entire amount on day one. Instead, they release money in installments tied to specific milestones. Understanding how these draws work keeps your project moving and prevents you from running short on cash when your contractor needs payment.

    Why lenders use draws instead of lump sum payments

    Lenders protect their investment by releasing money as work is verified. If a contractor abandons a project halfway through, the lender has only funded completed work, not the entire contract amount. This system also protects you—it ensures the contractor stays on site and keeps working.

    I’ve seen projects stall because an owner ran out of funds before completion. The contractor stops work, disputes arise, and finishing the project becomes exponentially more expensive. The draw system, while it feels bureaucratic, prevents that scenario.

    Draws also tie payment directly to progress. This creates accountability on both sides. The contractor completes work to a standard the lender approves. You don’t pay for work that hasn’t been done or doesn’t meet specifications.

    How the draw process actually works

    The draw process follows a repeating cycle during construction. Your contractor completes work at a scheduled milestone. They submit a pay application—a formal request for payment that documents what work was completed and the cost. Your lender (or a third-party inspector they hire) inspects the work, verifies the pay application against the construction documents, and approves or requests changes. Once approved, funds are released to you or directly to the contractor.

    The timeline for each draw varies. Some lenders process draws in 5 business days. Others take 2-3 weeks. Delays in inspection, incomplete documentation, or discrepancies between the pay application and actual work can push approval back further.

    Your role in this process is critical. You need to understand what work was supposed to be completed before the draw request was submitted, verify the contractor’s pay application matches that work, and flag any problems before the lender inspects. If you miss something, your lender’s inspector might catch it—but they might not, and you’ll end up paying for work that doesn’t meet your specifications.

    Step 1: Understand your loan agreement and draw schedule

    Your lender’s loan documents spell out how many draws you’ll have and when they occur. This schedule is based on construction phases, not arbitrary dates. A typical residential project might have draws at foundation, framing, electrical rough-in, drywall, final mechanical, and final completion—but your specific schedule depends on your project scope and lender requirements.

    • Request a copy of the draw schedule from your lender in writing, and confirm it in your construction contract with your general contractor
    • Identify the percentage of total project cost tied to each draw—for example, foundation might be 8%, framing 12%, final 15%
    • Note any holdback requirements—most lenders withhold 5-10% of the total project cost until final completion and approval
    • Ask your lender if they require the general contractor to submit proof of payment to subcontractors before approving each draw
    • Confirm whether your lender will inspect the work themselves or hire a third-party inspector
    • Get the contact information for whoever will be managing draws on the lender’s side

    Example: Your $500,000 loan has 6 draws: foundation $40,000, framing $60,000, mechanical/electrical rough-in $75,000, drywall $80,000, finishes $120,000, and final $100,000. A 5% holdback ($25,000) isn’t released until the project is 100% complete and the lender signs off. If the lender’s inspector finds unfinished work or quality issues, that draw gets delayed until corrections are made.

    Step 2: Organize and review construction documents before each draw

    Before your contractor submits a pay application for a draw, you need to know what work should be complete at that milestone. This means reviewing the construction documents—the drawings, specifications, and contract—that define the work for that phase. If you don’t have a clear picture of what should be done, you can’t verify that the contractor’s pay application is accurate.

    • Pull the relevant drawings and specifications for the current construction phase
    • Create a simple checklist of major items that should be completed before the draw—walls framed, electrical wiring run, HVAC installed, etc.
    • Note any items that were modified by change orders, and confirm those changes are reflected in the pay application amount
    • Review previous draw requests to understand the format your contractor uses and what details they include
    • Keep all RFIs (Requests for Information—clarifications about how the work should be done) and their resolutions organized so you can reference them if the contractor’s pay application raises questions

    Example: Before the framing draw, you pull the structural drawings and confirm the contractor has framed all exterior walls, interior load-bearing walls, and installed the first-floor deck system. The drawings also specify that all blocking for future mechanical runs is in place. You create a one-page checklist and walk the site before approving the pay application.

    Step 3: Request and review the pay application from your contractor

    Your contractor submits a pay application—the formal document requesting payment for completed work. This document should list all work completed since the last draw, the contract cost for that work, and the amount being requested. It should be detailed enough that you and your lender can verify the work was actually done.

    • Require your contractor to submit the pay application at least 10 business days before the draw deadline so you have time to review and ask questions
    • Confirm the pay application is signed and dated by the general contractor or their authorized representative
    • Verify that the work listed in the pay application matches the construction documents and your checklist of what should be complete
    • Check that any change orders approved since the last draw are reflected in the new pay application amount
    • Look for unexplained increases in cost—if framing was supposed to be $60,000 and the pay application shows $65,000, ask why before submitting to your lender
    • Confirm that the contractor has listed labor, materials, and subcontractor costs separately if your lender requires it

    Example: Your contractor submits a framing pay application for $62,000 instead of the $60,000 budgeted. They note that additional bracing was required due to wind load requirements in the drawings. You review the emails with the structural engineer, confirm this was necessary, and document it before sending to your lender. Without this explanation, the lender might hold the draw pending clarification.

    Step 4: Walk the site and verify work completion

    Before you approve a pay application and submit it to your lender, walk the construction site yourself. You don’t need to know how to frame a wall or run electrical conduit—you need to verify that the work described in the pay application is actually there. This step catches problems before they reach your lender, which prevents draw delays and gives you time to address quality issues.

    • Schedule a site walk within 2-3 days of when your contractor says the work phase is complete
    • Use your checklist and the pay application as a guide—check off items as you see them
    • Take photos or videos of major completed items, especially if you’re unfamiliar with how the work looks at that stage
    • Note any incomplete items, quality issues, or work that looks different from the drawings—don’t assume it’s intentional
    • Ask the contractor or site supervisor directly about anything that looks wrong or unfinished before drawing conclusions
    • Document your findings in writing, even if everything looks complete—this protects both you and your contractor if the lender’s inspector raises questions later

    Example: You walk the site during the framing phase and notice the contractor hasn’t installed the blocking for HVAC penetrations that the drawings show. You point this out to the general contractor immediately. They confirm it was missed and add it to the scope before submitting the pay application. Your lender’s inspector approves the draw without delay because the work is actually complete.

    Step 5: Submit the pay application to your lender with your approval

    Once you’ve verified the work is complete and the pay application is accurate, submit it to your lender along with your written approval. Your lender will use this submission as the starting point for their inspection and approval. A clean, well-documented submission speeds up the draw approval process.

    • Send the pay application to your lender’s draw manager in the format they specify—some want it by email, others use a portal
    • Include a cover letter from you stating that you’ve reviewed the pay application and verified the work is complete
    • Attach copies of the relevant portions of the construction documents so the lender’s inspector can cross-reference without searching
    • Include photos of completed work if the lender requests them or if anything in this draw phase is complex or difficult to verify visually
    • Note any change orders that affected this draw in your cover letter so the inspector knows to expect cost variations
    • If you’ve documented any site issues in previous draws, mention if they’ve been resolved before this draw

    Example: You send the framing pay application to your lender with a one-page cover letter confirming you’ve walked the site, verified completion against the drawings, and approved the work. You attach the structural drawings that show the blocking locations and note that an RFI about bracing was resolved per the structural engineer’s email. The lender’s inspector approves the draw within 5 business days because the documentation is clear.

    Step 6: Manage timing to keep your contractor paid on schedule

    The draw approval process takes time—from submission to inspection to funding, plan on 7-14 business days minimum. If draws are delayed, your contractor may run short on funds and pause work. Staying ahead of the timeline prevents this and keeps your project on schedule.

    • Create a simple calendar that works backward from your lender’s processing timeline—if they need 10 business days to process, your contractor should submit 12-14 days before funds are needed
    • Build a 1-week buffer into your schedule for any surprises—incomplete work, documentation issues, or inspector availability
    • Alert your lender early if you anticipate a draw submission, so they can schedule their inspector before you actually submit
    • If your lender is slow, discuss with your contractor whether they can arrange a short-term line of credit to bridge the gap between work completion and draw funding
    • Track each draw submission and approval date in a simple spreadsheet so you can identify patterns—if every draw takes 2 weeks, plan accordingly in future timelines
    • If a draw is delayed, ask your lender specifically what’s holding it up and what you need to provide to move it forward

    Example: Your contractor completes framing on a Friday and submits the pay application on Monday. You walk the site Tuesday, approve it Wednesday, and submit to your lender Thursday. Your lender’s inspector visits Friday, approves Monday, and funds are available by Wednesday. Total time from completion to payment: 10 business days. Your contractor’s cash flow stays on track.

    Step 7: Track draws against your budget and contract

    Each draw represents real money leaving your account and going toward your project. Tracking every draw against your original budget and contract protects you from cost overruns and helps you spot problems early. By the time you’ve completed half the draws, you should have a clear picture of whether the project is running over budget.

    • Create a simple spreadsheet with columns for: draw phase, original budgeted cost, actual draw amount, variance, cumulative cost, and cumulative budget
    • After each draw approval, update the spreadsheet and compare actual costs to budget—if you’re over budget before the halfway point, investigate why and adjust the remaining draws if needed
    • Note which draws included change orders and the change order amount so you can see if change orders are the cause of overruns or if base costs are running higher than expected
    • If a draw is significantly higher or lower than budgeted, ask your contractor why before approving payment—variances usually signal hidden problems or scope confusion
    • Review cumulative spending with your lender if you’re trending toward needing more than your loan amount—don’t wait until the final draw to discover you’re short
    • Keep all approved pay applications and draw documentation organized chronologically—you’ll need these if disputes arise or if you need to verify what was paid for

    Example: Through the first three draws, you’ve spent $175,000 of a $500,000 budget. Foundation was on budget, framing was $4,000 over due to a change order you approved, and rough-in trades were $2,000 under due to a scope adjustment. You’re trending 1.2% over budget at the halfway point, which is manageable. You note this in your tracking spreadsheet and watch the remaining phases closely.

    What to watch for

    • Incomplete work included in a pay application—if the contractor requests payment for framing but the roof isn’t weather-tight, that phase isn’t truly complete from the lender’s perspective
    • Pay applications that don’t match change orders—if you approved a change order for $5,000, that amount should appear in the next draw request, not disappear
    • Requests to pay for materials delivered but not yet installed—most lenders won’t fund this unless materials are on-site, protected from weather, and clearly identified for your project
    • Sudden cost increases without explanation—if drywall is supposed to be $15,000 and the pay application shows $18,000, ask why before submitting to your lender
    • Missing documentation or signatures—if the contractor’s representative hasn’t signed the pay application or the lender’s required forms are incomplete, the draw will be delayed
    • Work that doesn’t match the drawings or specifications—unusual spacing, different materials than specified, or finishes that look different warrant a question before approval
    • Draws submitted late in the approval window—if your lender needs 10 business days and the contractor submits on day 8, you’ll have no time to review before the deadline

    Questions to ask your lender

    Your lender has specific requirements for draws, and understanding them upfront prevents delays and surprises. Ask these questions early, get the answers in writing, and refer back to them throughout construction.

    • What is your standard processing timeline from submission to funding for each draw?
    • Do you require a third-party inspector, or will your staff inspect the work? How far in advance should we schedule inspections?
    • What documentation do you require with each pay application—photos, lien waivers, proof of payment to subcontractors, or other items?
    • If work is incomplete or doesn’t meet specifications, will you approve a partial draw for completed items, or will you hold the entire draw until everything is finished?
    • How do you handle change orders in the draw process? Should the contractor add change order amounts to the next regular pay application, or should they be processed separately?
    • If we need funds before the next scheduled draw—for an emergency repair or unexpected condition—can a draw be accelerated or can we request an interim draw?
    • What is your policy on the final draw? Do you require punch list completion, lien waivers from all contractors and subcontractors, or an architect’s certification of completion?
    • If the project runs over budget, what happens to draws beyond the original loan amount? Do we need to request a loan modification?
    • Can you provide a sample pay application form so our contractor knows exactly what you need?

    The bottom line

    Construction loan draws aren’t obstacles—they’re a structure that protects both you and your lender by tying payment to verified work completion. Understanding the draw process, staying organized with documentation, and communicating clearly with both your contractor and lender prevents delays and keeps your project on track financially. Start before construction begins by getting your draw schedule and requirements in writing, then follow the process consistently through every phase.

    Managing draws involves reviewing and approving pay applications, which means you need to understand what work was actually supposed to be completed at each stage. We built Brixzly because owners deserve the same information their contractors have when it comes to construction documents. Having a clear understanding of your drawings and specifications makes it infinitely easier to spot problems in pay applications before they reach your lender, which keeps draws moving and your project on schedule.

    FAQ

    How often do construction loan draws happen?

    Most residential construction projects have 5-8 draws spread across the entire construction timeline. The exact frequency depends on your lender’s requirements and the length of your project. A 12-month project might have monthly draws. A 6-month project might have draws every 4-6 weeks. Your lender will specify the schedule upfront in your loan agreement.

    What happens if my contractor submits a pay application but the lender’s inspector finds incomplete work?

    The lender will typically put the draw on hold until the work is finished or corrected. You’ll be notified of the issues, and the contractor will need to complete the work before resubmission. This can delay funding by 1-3 weeks depending on how long corrections take. This is why walking the site yourself before submitting to your lender is critical—it gives you a chance to catch problems and have them fixed before the lender’s inspection.

    Can I access the full loan amount upfront instead of using draws?

    Virtually no residential construction lenders offer this option. Draws protect both the lender’s investment and yours by ensuring work is completed to specification before funds are released. Some lenders offer faster processing or allow interim draws between scheduled phases, but the draw system itself is non-negotiable.

    Who pays the third-party inspector if my lender hires one?

    The lender typically covers the cost of their own inspector as part of their loan origination and servicing fees. However, some lenders pass inspection costs to the borrower. Ask your lender upfront whether inspection fees are included in your loan or if you’ll be charged separately.

    What is a lien waiver and why does my lender want it with draws?

    A lien waiver is a document signed by the contractor or subcontractor stating that they’ve been paid in full for the work completed in that draw phase. Lien waivers protect you from mechanic’s liens—claims contractors can file if they aren’t paid. By requiring lien waivers before releasing draws, lenders ensure the contractor has actually paid their subcontractors and suppliers. This is important to you because it prevents those subcontractors from later filing a lien on your home if the general contractor doesn’t pay them.

    What happens to the holdback amount after construction is complete?

    The holdback—typically 5-10% of your total project cost—is released as a final draw once the project is 100% complete, all inspections are passed, punch list items are finished, and your lender approves final completion. You’ll typically need to provide lien waivers from all contractors, proof that all invoices have been paid, and sometimes an architect’s sign-off before the final draw is approved. Plan on this taking 2-4 weeks after you believe construction is finished.

  • What Is a Draw Request in Construction?

    Quick answer
    A draw request is a formal invoice contractors submit to request payment for work completed during a specific phase of a construction or renovation project. The homeowner or project manager reviews the request, verifies the work is actually done, and then releases funds according to the loan or financing agreement.

    Draw requests protect both you and the contractor by tying payments to actual progress rather than releasing all funds upfront or at unpredictable times.

    Why Draw Requests Matter in Construction Projects

    Construction projects cost tens of thousands or hundreds of thousands of dollars, and most homeowners don’t have the full amount sitting in a bank account ready to hand over on day one. Lenders and contractors both know this, which is why the draw request system exists. It breaks the project into measurable phases and releases money in chunks as work gets completed.

    The problem is that many homeowners don’t understand what they’re approving when they sign off on a draw request. You might not realize that approving a draw means the contractor can now spend that money on materials or subcontractors, whether or not the work actually meets the original project plan. Without careful review, you could end up paying for work that was never finished, materials that were never delivered, or quality issues that won’t show up until later.

    Contractors sometimes submit draw requests that include work not yet completed or materials not yet on-site, expecting you to trust their timeline. Banks and construction lenders have specific rules about when and how much contractors can request, but homeowners doing direct renovations often have fewer protections. That’s why learning to read and question draw requests is one of the most important skills in any construction project.

    Step 1: Understand the Draw Schedule in Your Contract

    Before your contractor ever submits a draw request, your original construction contract should outline how many draws will happen and what work triggers each one. This is the foundation for all future payment decisions.

    • Review your construction contract and find the section labeled “draw schedule,” “payment schedule,” or “payment terms.” If this section is missing or vague, ask your contractor to create a detailed one before work begins.
    • Note how many draws are planned for your project (typically 3 to 8 depending on project size and complexity) and what percentage of the total cost each draw represents.
    • Identify the trigger for each draw—for example, “First draw upon foundation completion” or “Second draw when framing is 50% complete.” The trigger should be specific and measurable, not vague.
    • Check whether the contract mentions a final draw or retention amount (usually 10% of the total contract) that gets held back until the very end of the project.
    • Confirm whether your lender has approved the draw schedule if you’re using construction financing. Many lenders require their own inspections before releasing funds.
    • Ask your contractor or project manager to explain each draw trigger in plain language so you fully understand when payments are due.

    Example: A $200,000 kitchen renovation might have 5 draws: 20% ($40,000) at permit approval, 20% when cabinets and counters arrive, 20% when plumbing and electrical are roughed in, 20% when everything is installed, and the final 20% when the project passes final inspection and you sign off.

    Step 2: Receive and Document the Draw Request

    When a contractor believes they’ve completed work matching a draw trigger, they’ll submit a formal draw request—often called a “pay application” or “progress invoice.” Make sure you receive the full document and all supporting materials.

    • Ask your contractor to submit the draw request in writing, ideally using a standard form that includes the contractor’s name, license number, project address, invoice date, and the specific draw number.
    • Require the contractor to list exactly which work items were completed and which ones are being billed in this draw.
    • Request photos or video of completed work taken recently (within the past week) that show the current state of the project. These are essential for verification.
    • Ask for receipts or invoices from suppliers proving that materials listed in the draw request were actually purchased and delivered to the site.
    • Confirm the draw amount matches what was agreed to in your contract for this phase—don’t accept “extras” or additional requests mixed into the same draw unless you’ve signed a change order first.
    • Create a file folder (digital or physical) for each draw request so you can reference past payments and disputes later if needed.

    Example: Your contractor submits Draw #3 claiming framing is complete and requesting $50,000. They include photos showing the wooden frame structure in place, receipts from the lumber supplier for $28,000 in materials, and timecards showing 6 weeks of labor from the framing crew.

    Step 3: Schedule and Conduct a Site Inspection

    Never approve a draw request based solely on what the contractor tells you or shows in photos. You need to visit the site yourself (or have a third-party inspector do it) to verify the work actually matches the claim in the draw request.

    • Schedule your inspection for a time when you can spend at least 1 to 2 hours on-site without rushing, ideally right after the contractor says work is complete but before you sign anything.
    • Walk through the entire project area systematically, checking off each completed item against the draw request list. Make notes about anything that looks unfinished, damaged, or not matching the original plan.
    • Look for quality issues: are corners square, are surfaces level, are connections solid, and do materials match what was specified in the contract? Don’t approve sloppy work just to keep the project moving.
    • Check that all required permits and inspections have been obtained and signed off by the local building department before you release payment, especially for electrical, plumbing, and structural work.
    • Verify that the site is clean and safe—materials should be organized, debris should be removed, and there should be no safety hazards like open holes or exposed wiring.
    • Take your own photos and videos on-site to document the completed work so you have a record later if disputes arise.

    Example: You visit the site on a Tuesday morning and see that the drywall installation the contractor claimed was complete in Draw #3 is actually only 60% done. Three rooms still have bare framing visible. You stop the inspection, do not approve the draw, and contact the contractor to explain that work must be finished before payment is released.

    Step 4: Review Lender Requirements and Inspections

    If you’re using a construction loan, a mortgage line of credit, or any institutional financing, your lender almost certainly has specific rules about draw requests. These rules exist to protect the lender’s investment, but they also protect you.

    • Contact your lender’s construction department before the first draw request arrives and ask for their draw approval process and timeline.
    • Provide your lender with a copy of the draw schedule from your contract so they understand when payments are expected.
    • Ask your lender whether they require their own inspector to visit the site before they’ll release funds. Many do, and these inspections are free and very thorough.
    • Submit copies of all draw requests to your lender along with your own inspection notes so they can make an informed decision.
    • Understand that your lender may hold back additional funds beyond what the contractor requested—many lenders keep 10-20% in reserve until final completion and sign-off.
    • Ask your lender how long their approval process takes (typically 5-10 business days) so you can set expectations with your contractor about when payment will actually be released.

    Example: You approve Draw #2 on a Friday, but your lender requires their own site inspection before releasing funds. The lender’s inspector visits on Monday, finds that waterproofing wasn’t applied where required, and holds the entire draw until that issue is fixed. This delay is frustrating, but it protects you from paying for incomplete work.

    Step 5: Compare the Draw Request Against Your Contract

    Before you approve any payment, line up the draw request against your original contract and any change orders you’ve signed. Make sure the contractor isn’t sneaking in unauthorized work or charging more than agreed.

    • Pull out your original contract and the specific section describing the work that triggers this draw. Read it word-for-word and compare it to what the contractor claims is complete.
    • Check the contract price for this phase and make sure the draw request amount doesn’t exceed it. If the request is for more money than budgeted, don’t approve it without a signed change order.
    • Review any change orders you’ve signed since the project started and verify that the draw request accounts for them correctly.
    • Look for items in the draw request that weren’t in the original contract—these are “extras” and should never be approved without a formal change order and your written consent.
    • Confirm that all materials and labor specified in the contract are actually included in the completed work, not skipped or substituted with cheaper alternatives.
    • If the contract specifies particular brands or quality standards (e.g., “Kohler plumbing fixtures” or “grade A lumber”), verify that’s what was actually installed.

    Example: Your contract specifies “granite countertops with 1-inch edge detail,” but Draw #2 shows laminate countertops were installed instead. You stop payment approval and contact the contractor to demand the specified materials be installed before you release any funds.

    Step 6: Check for Mechanics Lien and Lien Waiver Documents

    Before you release payment on a draw request, the contractor and their subcontractors need to sign documents promising they won’t file a “mechanics lien” (a legal claim against your property) if they don’t get paid. These are called lien waivers.

    • Ask your contractor to provide a signed lien waiver from themselves (the general contractor) as part of each draw request. This is a standard form available from your state’s contractors board or from your lender.
    • Require lien waivers from all major subcontractors who worked on this phase—electricians, plumbers, HVAC specialists, etc. Each subcontractor should sign one.
    • Ask for lien waivers from major material suppliers who delivered products during this phase. Their signatures prove they’ve been paid by the contractor.
    • Understand that a lien waiver doesn’t mean the work was perfect; it just means the contractor and subcontractors have been paid up to that point and won’t file a legal claim against your property.
    • Keep copies of all lien waivers in your project file. If a dispute arises later, these documents prove who was paid and when.
    • Never release payment without lien waivers. This is your primary protection against unpaid subcontractors coming after you legally.

    Example: You’re ready to approve Draw #3 for $50,000, but the contractor doesn’t provide lien waivers from the electrician or plumber who did work in that phase. You tell the contractor: “No payment until I have signed lien waivers from every subcontractor.” The contractor gets them signed the next day, and then you release the funds.

    Step 7: Approve, Document, and Release Payment

    Once you’ve completed all the steps above and feel confident in the work quality and accuracy of the draw request, you can approve payment. But document your approval clearly so there’s no confusion later.

    • Write a brief approval note on the draw request form itself, date it, and sign it. Include the phrase “Approved for payment” so it’s crystal clear.
    • Keep a copy of the approved, signed draw request in your project file along with your inspection notes and photos.
    • Provide a copy of the approved draw to your lender (if applicable) so they can process payment to the contractor.
    • Communicate the approval to your contractor in writing—email is fine—confirming the draw amount and approximately when they can expect payment based on your lender’s timeline.
    • Do not give the contractor cash or personal checks. Payments should go through your lender (if you have financing) or through a formal bank transfer that creates a record.
    • Keep records of every payment: the check number, date, amount, and which draw it corresponds to. This is essential for your taxes and for resolving disputes.

    Example: On Wednesday, you sign off on Draw #4 after verifying all work is complete. You email the contractor: “Draw #4 for $45,000 is approved. Lender typically releases funds within 5-7 business days. I’ll notify you when payment has been deposited.” You keep a copy of the signed approval in your file and forward it to the lender the same day.

    Red Flags to Watch For

    • A draw request with no supporting photos or documentation—always demand proof of completed work.
    • A draw request that includes work not specified in your contract or in any signed change order.
    • A contractor asking for the full remaining contract amount in one draw instead of following the agreed schedule.
    • Missing lien waivers from subcontractors or suppliers—this is a serious red flag that someone might not have been paid.
    • Visible quality problems on-site that the contractor claims are “cosmetic” or “will be fixed later”—don’t approve payment until everything is done right.
    • A request to approve a draw “pending” an inspection or completion, rather than after work is demonstrably finished.
    • Pressure from the contractor to approve quickly without giving you time to inspect and review—legitimate contractors expect this process to take a few days.
    • Inconsistency between what was promised in the contract and what’s actually been installed or completed.

    Questions to Ask Your Contractor

    Before you approve any draw request, ask these questions to make sure you fully understand the work that’s been completed and the payment being requested.

    • “Can you walk me through exactly which items on our contract are complete and being billed in this draw?”
    • “Do you have photos from the past week showing the current state of the work?”
    • “Have all required building inspections been completed and approved by the city for the work in this draw?”
    • “What permits or inspections are still pending before we move to the next phase?”
    • “Will you provide signed lien waivers from yourself, all subcontractors, and major suppliers as part of this draw submission?”
    • “Are there any items in this draw that are extras or changes beyond our original contract?” (If yes, ask why they’re not on a separate change order.)
    • “If I find problems during my inspection, how much time will you need to fix them before I approve payment?”
    • “What is the timeline between when I approve the draw and when you actually receive payment?”
    • “Are there any outstanding invoices from subcontractors or suppliers that I should know about?”
    • “What happens if I don’t approve this draw right away—will it delay the next phase of work?”

    Bottom Line

    A draw request is how contractors get paid for completed work in phases during a construction project. Your job is to verify that the work described in the request is actually done, done correctly, and matches what you agreed to pay for in your contract. Taking time to inspect the site, review documentation, check for lien waivers, and compare the request against your contract protects your money and your project.

    The approval process typically takes 3-5 days from the time you receive a request until payment is released, so don’t let contractors rush you. The few hours you spend verifying each draw request can save you thousands of dollars in mistakes, unpaid subcontractors, or poor-quality work.

    Managing draw requests and payment approvals is one of the most important parts of controlling a construction project. Brixzly helps homeowners and project managers keep track of draw requests, approved changes, site inspections, and payment records all in one organized place, so nothing slips through the cracks and you always know exactly what you’ve approved and what you still owe.

    FAQ

    How many draw requests are typical in a construction project?

    Most residential construction projects have between 3 and 8 draw requests, depending on project size and complexity. A small bathroom renovation might have 3 draws, while a full home renovation or new construction could have 8 to 10. The number should be spelled out in your original contract. More frequent draws (every 2-3 weeks) give you better control and allow for faster corrections if work isn’t meeting standards.

    What percentage of the total contract price should each draw be?

    Each draw should represent approximately equal portions of the total contract price, but the exact percentages depend on your project. A typical breakdown might be: 20% at permit approval, 20% after framing, 20% after electrical and plumbing rough-in, 20% after final installation, and 20% after final inspection. Some contractors prefer unequal draws that align with their costs—for example, 10% upfront for materials, then 30% when major work is underway. Whatever the breakdown, it should be in your written contract.

    Can a contractor refuse to provide lien waivers?

    A contractor can refuse, but you should never approve a draw without them. Lien waivers are standard in the industry and are required by almost all lenders. If a contractor refuses to provide them, it’s a red flag that they or their subcontractors haven’t been paid. Do not release payment without signed lien waivers from the contractor and all subcontractors who worked on that phase.

    What should I do if I discover problems during my draw inspection?

    Stop your inspection, document the problems with photos, and notify the contractor in writing that the draw cannot be approved until the issues are fixed. Give the contractor a reasonable timeline (typically 3-7 days) to correct the work, then schedule a follow-up inspection. Only approve the draw once the work meets your contract specifications. Do not approve a draw for work that’s incomplete or below quality standards.

    Can I withhold a draw request as punishment for slow progress?

    You should only withhold approval if the work doesn’t meet the standards agreed to in your contract or if safety and quality requirements aren’t met. However, if the contractor is moving slower than expected but the work is being done correctly, withholding payment may actually slow things down further or cause the contractor to stop work entirely. It’s better to have a direct conversation about the timeline and adjust your expectations or your draw schedule if needed.

    What happens if the contractor becomes insolvent or goes out of business before the final draw?

    This is why lien waivers and retained funds (holding back 10-20% until final completion) are so important. If the contractor fails to complete work or goes out of business, you can use the retained funds to hire a replacement contractor to finish the job or correct problems. Lien waivers also ensure that subcontractors have been paid, so they can’t file liens against your property. If the contractor disappears mid-project, contact a new contractor for an estimate to complete the work using your retained funds.

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