If you’re building in Texas with a construction loan, the bank doesn’t hand you the money up front. It releases it in stages — called draws — as the work gets done. Most first-time owners and developers learn how draws work the painful way: mid-project, with subcontractors waiting on money that’s stuck at the bank. This guide explains the whole cycle in plain English, so you understand it before your first draw, not after your first stalled one.
What a construction draw actually is
A draw is a request to your construction lender to release part of the loan to pay for work completed. The bank’s position is simple: it will fund work that has verifiably been done, at the values everyone agreed to up front. The document that carries that agreement is the schedule of values — a line-item breakdown of the whole job with a dollar amount against each line. Every draw is measured against it.
On most Texas projects the request travels on two standard forms: AIA G702 (the Application and Certificate for Payment — the summary sheet) and AIA G703 (the Continuation Sheet — the line-by-line detail showing percent complete per trade). Some lenders use proprietary advance-request forms instead; the discipline is identical even when the paperwork differs.
The draw cycle, step by step
- Work gets done. The contractor completes a stretch of the project — say, framing and roof dry-in.
- Percent complete is measured. Each schedule-of-values line is updated: framing 100%, plumbing rough-in 60%, and so on. The percentages must match the field, not hopes.
- The draw package is assembled. G702/G703 (or the bank’s forms), invoices where required, and — critically — lien waivers from the general contractor and subcontractors for money previously paid.
- The lender’s inspector visits. Most construction lenders send a third-party inspector to walk the site and confirm the claimed percentages before funding.
- The bank funds. Money is released — to the title company, the builder, or the owner’s construction account depending on how the loan is structured.
- Waivers are collected for this payment. The cycle repeats — usually monthly — until final completion and the last retainage release.
Where draws go wrong
Draw problems are rarely construction problems. They’re paperwork and process problems, and they cluster in four places:
- A missing lien waiver. In Texas, an unpaid subcontractor can file a lien against your property even after you’ve paid the general contractor. Lenders know this, so one missing waiver in the chain can stall an entire draw for weeks.
- A front-loaded schedule of values. If early line items are overpriced (so the contractor collects cash faster than the work is done), the lender’s inspector will eventually catch the imbalance — and every draw after that gets extra scrutiny.
- Percent-complete disputes. The contractor says 80%, the inspector says 60%. Without an owner-side record of what was actually finished, you’re refereeing a fight you have no file for.
- Math and paperwork errors. A G703 that doesn’t tie to the G702, retainage calculated inconsistently, change orders that never made it into the schedule of values. Each one erodes the bank’s trust in the whole project.
What a stalled draw actually costs
When a draw stalls, subcontractor payments stop, and unpaid subs stop showing up. Two missed draw cycles on a mid-size project routinely add 30–45 days to the schedule — and every one of those days carries interest, extended general conditions, and overhead. A paperwork problem that cost nothing to prevent can quietly consume a meaningful slice of the developer’s margin.
An owner’s pre-draw checklist
- Schedule of values approved by the lender before construction starts — and checked for front-loading.
- A defined monthly draw calendar (submission date, inspection window, funding date).
- Conditional waivers collected with each payment; unconditional waivers after funds clear — from the GC and subs.
- Change orders priced, signed, and added to the schedule of values before the work happens.
- A running reconciliation: funded to date vs. remaining budget, by line item.
- One clean, numbered file per draw — the file an auditor or the bank’s workout group would want to see.
Frequently asked questions
Who prepares the draw package — the contractor, the owner, or the bank?
Usually the contractor prepares the pay application, but the owner is the borrower — the bank holds you responsible for what’s submitted. That’s why many owners and lenders bring in independent draw administration: someone owner-side who verifies percent complete, tracks the lien-waiver chain, and keeps the file audit-ready.
How long does a construction draw take to fund in Texas?
With a clean package, most lenders fund within 5–10 business days of submission, including the inspection. Missing waivers or percent-complete disputes are what push draws to three weeks or more.
What’s the difference between conditional and unconditional lien waivers?
A conditional waiver releases lien rights only once the payment actually clears — it’s what a sub signs when handing over an invoice. An unconditional waiver releases rights outright and should only ever be signed after money is received. Texas has statutory forms for both; using them in the right order is what keeps the chain intact.
Epex Consulting provides independent construction draw administration for owners, developers, and lenders across Texas — and reviews budgets and schedules of values before the first draw ever goes in. If this is your first project, start with our first-time owner’s guide or book a project review.