New construction loans are built around controlled draw disbursements tied to verified progress.
Your budget must be line-item, your timeline must be realistic, and your draw stages must match inspectable milestones.
Most construction cash crunches come from poor sequencing, underestimated soft costs, or change orders without funding plans.
The fastest builds are not the cheapest on paper; they’re the most predictable and well-managed.
If you want a smooth funding experience, align budget, milestones, and inspections before you break ground.
Use this guide to build a construction plan that funds cleanly from start to finish.
At a glance
- Construction funding is typically released in draws tied to milestones
- Inspections verify progress before funds release
- Line-item budgets prevent mid-project surprises
- Change orders must be documented and funded
- Soft costs (permits, engineering, utilities) are commonly underestimated
- Buffer time and contingency protect the build and the exit
How construction loan draws typically work
Construction funds are usually not advanced in a lump sum. Instead, they are released as you complete milestones. A typical milestone pattern includes:
- Site prep and foundation
- Framing
- Rough mechanicals (plumbing, electrical, HVAC [Heating, Ventilation, and Air Conditioning])
- Drywall and interior finishes
- Exterior completion
- Final completion and punch list
The exact stages vary by project scope, location, and build type.
What inspections are validating
Inspections are not “busy work.” They are a control mechanism:
- confirms work is completed as claimed
- confirms the build is consistent with the approved plan and budget
- reduces fraud risk and protects timeline integrity
- ensures the remaining budget can realistically finish the project
The construction budget categories that prevent draw friction
Include these categories explicitly:
- Hard costs: foundation, framing, roofing, systems, finishes
- Labor + subcontractors: each trade as a separate line item
- Permits and city fees
- Engineering and plans
- Utility connections
- GC [General Contractor] overhead and supervision
- Insurance and site security
- Contingency (commonly 10–15% depending on complexity)
The 5 construction mistakes that create funding delays
- Vague budgets with missing categories
- Change orders without written approvals and budget updates
- Milestones that don’t match inspectable progress
- Permits and utility timelines ignored
- No contingency, then the project stalls when surprises happen
Next step
Construction program: https://ambitionlending.co/new-construction-loans/
Hard money options: https://ambitionlending.co/hard-money-loans/
Submit a project: https://ambitionlending.co/contact/
Frequently Asked Questions
What is a construction draw schedule?
A draw schedule is the planned set of funding releases tied to specific construction milestones that can be inspected and verified.
Why do construction loans require inspections?
Inspections verify progress and protect the project by ensuring funds are released for completed work, not for unverified work.
How detailed should a construction budget be?
It should be line-item by trade and phase, including soft costs and contingency. Detail reduces uncertainty and draw friction.
What are the most common causes of construction delays?
Permitting, material lead times, subcontractor scheduling, change orders, and weather are common causes.
What happens if costs increase mid-build?
Cost increases typically require borrower funds, a scope change, or a revised plan. Document changes early to prevent delays.
How do I prevent a cash crunch?
Use realistic budgets, include contingency, sequence trades correctly, and document changes immediately.
