Construction financing usually does not work like a standard mortgage where the entire loan is disbursed at closing. Instead, funds are commonly released in stages as construction progresses. This draw structure allows the lender to monitor the project and ensures that financing corresponds with completed work. For investors, understanding how draws work is essential because construction cash flow depends on when funds become available.

With new construction loans, the project is typically divided into milestones. As specific portions of the construction are completed, an inspection can verify the progress before the next portion of financing is released. This means investors need to maintain accurate records and coordinate closely with contractors and inspectors. A delay in documenting completed work can potentially affect the timing of the next draw.

Investors considering real estate construction loans should ask how the lender handles inspections, draw requests, processing times, and eligible construction expenses. InstaLend's process allows borrowers to submit the scope of work through its portal and choose a self-inspection or third-party inspection. Funds are then released based on the completed percentage of the work after the inspection is received. This type of construction loan financing can help align borrowing with the actual progress of the project. Investors should still maintain sufficient working capital for expenses that must be covered before a draw is released. Understanding the draw schedule before construction starts helps contractors plan their work and helps investors avoid unexpected interruptions caused by funding gaps.