Fix-and-flip loans operate differently from traditional financing, and one of the biggest differences is the draw schedule. This is the system lenders use to release rehab funds in stages as work is completed. Investors who understand this process keep their projects moving. Those who don’t often experience preventable delays, cash-flow problems, and increased holding costs.
A draw schedule is created before closing and outlines how the lender will release funds. Most projects include stages like demolition, framing, mechanical rough-ins, interior finishes, exterior work, and final completion. Each stage is tied to a specific dollar amount from your rehab budget.
The key rule is simple: draws are reimbursements. You must complete the work first, and the lender funds it afterward. This protects both the project and the lender, ensuring money only goes toward verified improvements.
Before every draw, a third-party inspector visits the property to assess progress. They record percentage completion for each line item and submit a report. When the lender approves it, funds are wired—usually within one to three business days.
Delays typically happen when the borrower isn’t prepared. Missed inspections, unavailable contractors, unapproved change orders, and insufficient upfront cash can all slow down the process. Another common issue is performing work outside the original scope without notifying the lender, which prevents those items from being funded.
To keep draws flowing smoothly, investors should maintain a clean, accessible job site; communicate with contractors about inspection timing; request change orders early; and always keep proof of materials and labor. Planning your project stages around the draw schedule ensures you never run out of liquidity mid-rehab.
Understanding how draw schedules work is one of the simplest ways to stay ahead in the fix-and-flip game. With good planning and clean execution, you can complete projects faster, reduce costs, and protect your profit margins.
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