How to Make Your Construction Draw Process Faster

Do you know the true turn times for your construction draw process? Typically, lenders measure time on draw requests starting and ending with what they can control – from the time the draw request is received to the time the draw is approved.

Lenders using a manual draw process report that it takes 5-7 days to turn around a draw request. While this is a typical method to measure turn times, it’s actually a limited view of the entire construction draw process.

What lenders may not realize is the extent of time before and after a draw that adds up to be a part of the entire draw processing time for their contractors. Considering the contractor’s process into your overall timeline will help:

1. Eliminate project delays and get more projects done on time and on budget
2. Reduce the risk of liens being placed by unpaid contractors or subcontractors on the project

Construction Lender Draw Approval Process

From the lender point of view, the draw request begins once the paperwork has arrived. It’s this draw request from the contractor that triggers the lender to begin the draw request approval process. This is the point at which the lender begins marking the time and must begin and complete key tasks such as:

• Order the draw inspection
• Verify documents
• Order title
• Inspection report reviewed
• Documents okay
• Inspection approved
• Title okay
• Documents signed
• Construction draw submitted

Once all tasks are completed, the lender will approve the draw and wrap up their involvement in the draw process. The process from draw request to draw approval typically takes 5-7 business days and is the time frame often cited as the complete draw approval process.

Contractor Draw Request Process

Let’s take a step back. Does the draw process really start when the lender receives the draw request? And is it really complete when the lender approves the draw?

To get a greater understanding of payment turn times, we need to look at the bigger picture, and that starts with the contractor’s activities before and after the lender participation.

Steps the contractor must take before he even gets to the lender:

1. Find appropriate draw request form
2. Print out the form
3. Fill out the form
4. Scan the form
5. Email form to the borrow for their signature
6. Wait for the signature
7. Once signed, get the completed draw request form to the lender (Typically by email, fax, or hand deliver)

Many things can delay this process, including working within the contractor, borrower, and bank’s schedules, obtaining signatures and filling out the proper form, and potential printer and scanner technical difficulties. It takes an average of 3 days to get one draw request over to the lender.

Draw Disbursement and Contractor Payment

Add on the 5-7 days the lender needs to approve the draw, then an additional 1-3 business days for payment to finally be received by the contractor. In total, it can take up to 13 days for the contractor to get paid per draw request. And in the meantime, the contractor is cutting checks every week, and 49% report paying subcontractors before they see the draw disbursement from the lender.

It’s no wonder that projects sometimes go over deadline and budget. With contractors having to wait so long for their draws, they may not be able to maintain this payment timeline and also pay their subcontractors. In the future they will work with lenders who can support a faster process.

How to Make Your Construction Draw Process 55 Days Faster

In order to support a faster draw turn time, keep projects on track, and gain repeat business from contractors, lenders must turn to technology. Lenders using digital solutions such as construction draw software can reduce the draw processing timeline from 13 days to 2 days per draw. This means all parties are ahead of the game by 11 days on each draw. Considering that most construction loans have 5 draws, with a savings of 11 days each, in total everyone is benefiting by 55 days.

To make the construction draw process 55 days faster, you must automate your contractor’s payment process before and after your approval.

Land Gorilla’s digital draw process is simple with OneSite, a branded mobile app:

1. Contractor (or other stakeholder) logs into OneSite
2. Selects budget line items
3. Adds required documents
4. eSigns and submits for approval

Form fields are auto-populated, so submitting the request for e-signature takes a matter of seconds. Then the contractor can send the draw request to the lender, all in about 30 seconds. After draw approval, you can issue payment to the contractor via wire or check in just one hour.

Digitizing this process can become a game-changer for lenders who want successful construction loan programs.

THE REAL DRAW PROCESS TIMELINE

Do you know how long it really takes to process a draw?

How long you think it takes with a perfectly tuned manual draw process:

Day 1

Draw Requested

Documents Verified

Inspection Ordered

Inspection Approved

Title Approved

Documents Signed

Day 7

Draw Requested

How long long it really takes:

Day 1

Draw Requested

Print and fill out form

Scan form

Email/mail form to borrower

Email/mail form to lender

Day 3

Draw Requested

Documents verified

Inspection ordered

Inspection approved

Title approved

Documents signed

Day 10

Draw Approved

Payment approved

Payment generated by bank

Day 13

Payment Received

13 Days

Thirteen Days Represents The True Timeline When The Manual Process Works Seamlessly. However, The Average Experience Is Far From Ideal, And Delays Are Common.

So How Long Does It Really Take For A Contractor To Receive Payment?

ON AVERAGE IT TAKES

83 Days

For A Contractor To Receive Payment

Source: Levelset

Increased

RISK

of project delays, property liens, and ultimately running over your loan term How do you avoid this?

AN EFFICIENT

Digital Draw Process

Take your offline process online and expedite your draw process.

• Receive draw requests instantly

• Schedule inspections within the hour

• eSign documents

• Electronically generate lien waivers

• Digital title updates

• Send payment electronically

2 DAYS

Digital

VS

13 DAYS

Manual

Going digital can shorten your draw process time by 11 days, reducing risk and project delays.

How do you achieve this?

Construction Loan ManagerTM

The #1 Software Solution

Save 11 days per draw by switching to a digital draw management process. Eliminate the need for spreadsheets, snail mail, and manually signed documents.

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