Summary: A construction draw review is the lender’s check, before money leaves the loan, that the amount requested matches work actually done, that the people who did the work have been paid and have released their lien rights, and that the remaining budget still finishes the building. This post walks through the package, the checks and the controls examiners expect, and then shows where automation fits.
The draw package
On commercial projects the request usually starts with the AIA G702 Application and Certificate for Payment and the G703 continuation sheet. AIA’s instructions say the forms show “the total dollar amount of the work completed and stored to date, the amount of retainage (if any), the total of previous payments, a summary of change orders, and the amount of current payment requested,” broken out against a schedule of values.
Behind the forms sit the supporting documents: invoices from the general contractor and subcontractors, conditional lien waivers for the current payment and unconditional waivers for prior payments, an inspection report with percent complete by line, a title update, and any change orders. Residential and smaller commercial lenders use their own forms, but the content is the same.
The review, step by step
1. Tie the request to the budget. Each line of the schedule of values carries an original amount, prior draws, this request and a balance to finish. The reviewer checks that this request plus prior draws does not exceed the line, that change orders were approved before they moved a line, and that stored materials are documented.
2. Tie the request to the inspection. The inspector’s percent complete by line should support the amount requested. A line billed at 80 percent with an inspection at 60 percent is the classic overdraw.
3. Check the lien waivers. Conditional waivers should match this draw’s amounts; unconditional waivers should match prior payments, by contractor and subcontractor, with through-dates and signers that make sense.
4. Check title. No new liens since the last draw.
5. Check the balance to finish. After this draw, does the undisbursed loan plus any contingency still cover the remaining budget, with retainage intact?
6. Approve and record. Who reviewed, what was checked, what was found, and the documents behind each finding.
Why the review is slow
Most of the time goes into reconciling. A forty-line schedule of values against dozens of invoices and waivers, each in its own format, takes an experienced administrator a long time per draw. Meanwhile the borrower and contractor wait for funding, and the pressure to approve grows with each day.
What examiners expect
The OCC’s Commercial Real Estate Lending handbook lists the controls directly: “Effective controls include segregation of duties, site inspections, lien searches before disbursement, budget monitoring, and dual approval of loan disbursements.” It adds that “The lender’s title policy should be updated with each draw.”
The interagency real estate lending guidelines state that “loan disbursements should not exceed actual development or construction outlays.” The FDIC’s construction lending examination module asks whether disbursements are “Made only after management reviews written inspection reports, requisite lien searches, and title updates,” and whether draws are compared to the degree of completion. The Federal Reserve’s examination manual says “It is also important that the bank ascertain whether draws are being taken in accordance with the predetermined disbursement schedule.”
Where automation fits
Agents on the MightyBot platform read the whole package, extract the amounts, dates, parties and line items, and keep a pointer from each value to its source page. The lender’s draw policy is written in plain English and compiled into the checks above: budget to request by line, percent complete to inspection, waivers to payments, retainage, change order approvals and title conditions. Each draw comes back with its checks passed or failed and the evidence behind every finding.
MightyBot powers the Draw Agent at Built Technologies, which runs this review in production for construction lenders. How much runs without a person is the lender’s call: audit mode alongside reviewers, assist mode where agents prepare and a person approves, or straight-through handling for clean draws with exceptions routed to a reviewer. The buyer’s checklist is on the construction draw reviews page.
Draw review controls the money after closing. Many draw problems start earlier, in the request itself: DealScreen Construction screens ground-up construction loans before commitment, checking cash equity, the contractor and contract type, the interest reserve and preleasing.