Most borrowers spend months getting to the closing table and then get surprised by the part that comes next. On a bridge or construction facility, closing is not the finish line. It is the start of a process where every dollar after the first advance has to be earned in place. Here is how the money actually moves.
The first advance is smaller than most people expect. The initial draw at closing typically covers acquisition, pre-development costs, permits and demolition. Everything tied to vertical construction is funded later, against completed work. If your cash plan assumed the full facility would land in your operating account at closing, you are already short in week one. Size your working capital for the gap between the first advance and your first real draw.
Draws pay for work in place, verified by inspection. Each draw request is supported by a schedule of values, subcontractor pay applications or invoices, and conditional lien waivers. Before funds move, an inspector confirms the work is actually there. Assume a realistic turnaround: five to ten business days from a complete request to money, longer if the package has holes. Three draws at two weeks each is six weeks of float your budget has to absorb.
Retainage is why the last ten percent feels so slow. Lenders commonly hold back five to ten percent of each draw until the project is complete, inspected and lien-free. That holdback is not withheld forever, but it is withheld until the end. Developers who run tight on cash often discover they have financed the entire project except the final stretch, which is exactly when they need the liquidity most.
The interest reserve is real money, and it comes out of your loan. Most construction facilities include a reserve sized to carry interest through the build. Sometimes it is funded out of loan proceeds at closing, which means the number you thought you were borrowing is not the number that reaches the project. Ask directly whether the reserve sits inside the loan amount or on top of it, and how it gets replenished if the build runs long.
Change orders are where draws stall. A change order that has not been documented and approved is an unfunded cost. Building first and papering it later puts the lender in the position of funding something they never underwrote, and they will not. Keep a written change order log, get approval before the work starts, and know which changes your contingency is meant to absorb.
The six reasons a draw gets held up. In practice, almost every delayed draw traces back to one of these: an incomplete schedule of values, missing or improperly executed lien waivers, an inspection that was never scheduled, a change order without written approval, an expired insurance certificate, or a budget line that has already been fully drawn. Each one costs about a week, and they compound.
What to nail down before you close. Get the draw schedule in writing, tied to milestones rather than calendar dates. Confirm the inspection cadence and how much notice the inspector needs. Ask for the exact document checklist for a draw and the name of the person who approves it. Then build a cash plan that absorbs retainage plus thirty days of expenses, because somewhere in the project something will take longer than the schedule says.
None of this is complicated, and none of it is a reason to avoid construction debt. It is simply the operating reality of how the money arrives. Borrowers who understand the mechanics before closing spend their build managing the project instead of managing the lender.
If you are putting together a bridge or construction facility and want the draw structure explained before you sign, we walk through it at no cost and will tell you where the timing risk sits in your specific budget.
