How Do Progress Draws Work on a Development Finance Facility?

The lender does not normally hand over the full construction facility at settlement. The borrower submits draw requests for completed works and approved costs, often supported by QS certification, invoices and evidence that required equity has already been contributed.

Quick answer: The lender does not normally hand over the full construction facility at settlement. The borrower submits draw requests for completed works and approved costs, often supported by QS certification, invoices and evidence that required equity has already been contributed.

Questions borrowers, investors and developers commonly ask

  • Why will the bank only release part of the next builder invoice?
  • Do I have to spend all my equity before the lender starts drawing?

Draw rules protect cost-to-complete

The lender wants remaining undrawn funds plus committed borrower equity to be enough to finish the project at every stage.

Timing needs active management

QS inspections, lender approval and settlement of each draw can take time. Developers need sufficient working cash so trades are not dependent on same-day lender releases.

Funding / credit lens **Stronger** - Feasibility includes finance and contingency - Equity and cost-to-complete are clear - Builder, QS and exit strategy are credible **Needs closer assessment** - Presales or valuation uncertainty - First-time developer - Cost escalation or planning risk **Warning sign** - Profit exists only before finance costs - No contingency - Funding gap discovered after construction starts

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KK Neelamraju — Founder, GPS Finance Group

KK is a finance and credit professional with more than 20 years of lending and credit experience.

General information only. Commercial-property and development lending criteria vary by lender, transaction, security and market conditions. This is not legal, tax or investment advice.

Frequently asked questions

Why will the bank only release part of the next builder invoice?

The lender does not normally hand over the full construction facility at settlement. The borrower submits draw requests for completed works and approved costs, often supported by QS certification, invoices and evidence that required equity has already been contributed.

Do I have to spend all my equity before the lender starts drawing?

The lender wants remaining undrawn funds plus committed borrower equity to be enough to finish the project at every stage.

Will every lender treat this the same way?

No. Commercial and development lending policy varies materially by lender and transaction.

Should I apply before the structure is tested?

For material or unusual transactions, test lender fit and the funding structure before creating formal applications.

Sources and verification

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