How Draws and Payoffs Really Work in Builder Finance (Borrowing Base vs Master Guidance Line)

Draw management is the workflow lenders feel most intensely in Home Builder Finance, and it’s the workflow builders notice immediately when it slows down. Each draw request triggers a chain of eligibility checks tied to progress, inspections, and the structure of the agreement itself.

Borrowing bases fund at the line level, while master guidance lines allocate funding to individual units within a single line-level draw, two very different mechanics that determine how quickly and accurately funds can be released.

For lenders managing high-volume portfolios, draw speed is challenged by constantly changing inputs: progress updates, inspections, sales status changes, new collateral, or pending payoffs. Each change recalculates availability, which is why lenders frequently encounter delays, back-and-forth with borrowers, or last-minute corrections.

This guide breaks down how eligibility works, how draws differ between borrowing bases and master guidance lines, and why payoff logic behaves differently depending on the agreement.

Understanding Eligibility and Draw Availability

Draw availability is determined by how much of a unit’s value is unlocked and fundable at a specific point in the construction lifecycle. Eligibility changes constantly as progress updates, inspections occur, collateral activates, or payoffs post. 

Understanding these components is essential to knowing how much a lender can fund during a draw request.

Eligible funds

Eligible funds represent the portion of each unit’s commitment that is available based on current progress. As units advance through construction, more of their value becomes eligible. 

In borrowing bases, all eligible amounts roll into a single availability pool. In master guidance lines, eligibility is calculated and tracked per unit.

Progress completion

Progress drives eligibility. Completion percentages, either reported by borrowers or updated through inspections, determine how much construction value is released. These updates directly shape availability in both BB and MGL structures.

Principle balance

Availability is calculated as eligible funds minus principal balance. Principal increases as draws fund, and decreases when payoffs post.

• In borrowing bases, the principal balance exists only at the line level.
• In master guidance lines, each unit carries its own principal balance, influencing both availability and payoff requirements.

Cumulative availability

Availability is fluid. As collateral activates, progress updates, or units pay off, eligibility recalculates in real time. This cumulative figure determines the maximum amount a lender can fund during a draw request.

Unit-level vs line-level availability

The two credit structures differ fundamentally:

• Borrowing base: availability is calculated for the entire line of credit; borrowers request one draw amount and funds are not allocated per unit.
• Master guidance line: each unit has its own budget, eligible funds, and principal, giving lenders precise visibility into unit-level funding and payoff obligations.

This eligibility framework underpins how lenders evaluate draw requests, and why BB and MGL structures behave so differently in day-to-day operations.

How Draws Work in Borrowing Bases

In a borrowing base structure, draw requests are processed at the line-of-credit level, not at the unit level. This makes the workflow simpler for borrowers but places more responsibility on the lender to determine how much funding is available.

Single draw request at the LOC level

Borrowers request one draw amount for the entire borrowing base. They do not specify which units the draw should fund, because availability is calculated from the combined eligible value of all active collateral.

Borrower doesn’t allocate per-unit

Since there is no unit-level funding, the lender does all the allocation work behind the scenes. The draw is applied to the principal balance of the line, not to individual units. This structure is especially common for large builders who prefer straightforward, pooled funding.

Lender calculates availability from the whole pool

Availability comes from the full pool of eligible funds across the line. The system calculates:

Eligible Funds – Principal Balance = Draw Availability

Availability increases when:

• progress updates
• new units activate
• payoffs reduce principal

Borrowing bases rely entirely on this pooled availability calculation for each draw.

Inspections: verification vs gating

Inspections still matter, but they don’t block draws in the same way they do under master guidance lines. For borrowing bases, inspections primarily verify progress so the system can update eligible funds and availability. 

Funding isn’t tied to any single unit passing an inspection—it’s tied to the overall pool being accurate.

Speed expectations (same day)

Borrowing bases are built for speed. Because borrowers request only one number and lenders fund against a pooled availability amount, these draws often have same-day expectations. 

When availability is accurate and inspections are up to date, borrowing base draws move quickly and cleanly through the approval process.

How Draws Work in Master Guidance Lines

Master guidance lines are more detailed and granular than borrowing bases because they track funding at the individual unit level. Every unit has its own budget, progress, eligible value, and principal balance, which the lender must manage before a draw can be released.

Per-unit principal tracking

Each draw updates the principal balance of specific units rather than the line as a whole. This is what enables precise payoff calculations later. When a draw is funded, the system records the amount allocated to each unit so lenders always know exactly how much has been advanced.

Line-item budgets

Units under a master guidance line carry a full rolled-up construction budget representing total hard costs. Eligibility is measured against this total as progress increases over time.

While inspection workflows determine how progress is validated, the budget itself serves as the costs basis that governs how  much value can ultimately become eligible for funding,.

Unit-level availability

Availability is controlled at the unit level. Each unit has:

• its own budget
• its own percentage of completion
• its own eligible amount
• its own principal balance

A draw can only fund what each unit has earned individually. Even if the overall line appears to have availability, a single unit cannot receive more than its eligible amount.

Inspection-driven validation

Inspections play a much more direct role in MGL draws. When progress is inspector-driven, the updated completion percentage determines how much budget value becomes eligible. If an inspection hasn’t been completed or progress is outdated, availability for that unit does not update, slowing down the draw.

Multi-unit draw packages

When builders submit a draw request, it often involves multiple units at once. The lender reviews each unit’s eligible amount and saves the combined draw package. Only units with valid budgets, progress, and available funds are included in the package; others drop out automatically.

More complex sources and uses

Because each unit may have different line items, fees, or partial draw amounts, MGL draws often involve additional adjustments, such as:

• netting inspection fees
• allocating funding across multiple budget lines
• handling partial draws on specific units

The lender must review the sources and uses to confirm where funds are going and ensure that principal, eligibility, and budgets stay synchronized.

Key Differences Between Borrowing Bases and Master Guidance Lines

The Payoff Process (BB vs MGL)

Payoffs follow two entirely different paths depending on whether the line is structured as a borrowing base or a master guidance line. The distinction matters because it determines how lenders calculate the payoff amount and what data is used to close out a unit.

Borrowing Base Payoffs

Borrowing bases do not track principal at the unit level, which makes the payoff process simpler but less granular.

Key characteristics:

• No unit-level principal: The system records only a line-level principal balance. Individual units are not tied to specific funded amounts.
• Payoff often reflects the full commitment amount or zero, depending on overall availability: Because lenders cannot reconcile principal to a specific unit, payoff quotes commonly default to one of these two outcomes, which keeps portfolio movement simple for high-volume builders.
• Designed for large builder portfolios: This structure is intentionally streamlined for lenders managing dozens or hundreds of active units.
• Clean operational flow: Since payoffs don’t interact with unit-specific balances, the process avoids the complexity seen in more granular structures.

Master Guidance Line Payoffs

Master guidance lines require exact unit-level payoff accuracy, because every draw increases the principal tied to that specific unit.

Key characteristics:

• Unit-level payoff calculation: Each unit carries a tracked principal balance. The payoff amount equals the actual principal outstanding on that unit.
• Precision is essential: Because payoff accuracy depends on unit-level principal, lenders must have clean allocations throughout construction. Any errors affect the payoff amount.
• Payoffs post individually:  When multiple units pay off, each payoff posts as its own transaction rather than one combined entry.
• More detailed lifecycle tracking: This payoff structure allows lenders to know exactly how much was funded to each home—essential for smaller builders, custom homes, and portfolios requiring granular oversight.

Common Bottlenecks in Draw and Payoff Workflows

Draw and payoff workflows in Home Builder Finance are highly sensitive to timing and data accuracy. Because availability recalculates every time progress, inspections, collateral, or payoffs change, even small delays or inconsistencies can slow down funding. Several recurring bottlenecks appear across portfolios:

Delay in inspections

Inspections are a critical input for updating progress, especially on master guidance lines. When inspections occur outside the system or arrive late, progress remains outdated. This limits eligibility and prevents certain units from being included in draw packages.

Out-of-sync budgets

Budgets directly drive eligibility in unit-level structures. Inconsistencies—missing line items, incorrect totals, or mismatches between budget and appraisal—cause the system to flag errors. Draws cannot proceed until these corrections are made.

Appraisal gaps

Appraisals must match the selected plan and remain within their valid reuse period. If an appraisal expires or the wrong appraisal is tied to a unit, the collateral cannot move forward. This delays both activation and the eligibility calculations needed to support draws.

Sublimit blockers

Sublimits—such as spec caps, dollar caps, or unit allocations—can prevent new collateral from being activated or included in funding. If adding a unit would exceed a limit, the system issues warnings and requires the lender to resolve or accept the issue before continuing.

Borrower-provided spreadsheets

Builders often send their own spreadsheets tracking progress, costs, and sales status. These external files rarely match the system of record perfectly. Reconciling them is time-consuming but required to maintain accuracy for eligibility and payoff logic.

Data inconsistencies

Any misalignment between legal descriptions, sales status, progress, budgets, appraisals, or unit-level principal creates downstream issues. Since draw availability and payoff accuracy rely on clean data, inconsistencies can halt approvals until corrected.

Why Draw and Payoff Precision Matters

Draws and payoffs are where the strength of a lender’s Home Builder Finance operations becomes most visible. These workflows expose how well eligibility is maintained, how accurately collateral is structured, and how consistently data stays in sync across units and agreements. When everything is aligned, draw requests move quickly, payoffs post cleanly, and the line of credit stays accurate throughout the lifecycle.

Precision matters. Small discrepancies in budgets, progress updates, appraisals, or principal tracking can slow down funding or create issues at payoff. Clear, reliable inputs ensure availability reflects the actual state of the portfolio and that funding decisions remain sound.

Understanding how borrowing bases and master guidance lines differ — especially in eligibility, principal tracking, inspections, and payoff logic — gives lenders the clarity they need to operate at scale. When these mechanics are well understood and well-managed, lenders can support higher volumes, reduce operational friction, and deliver the faster draw experience builders depend on to keep projects moving.

If your team needs a clearer way to manage eligibility, progress, inspections, and payoff accuracy across borrowing bases and master guidance lines, Built centralizes these workflows in one system. This supports faster draw processing and more reliable lifecycle tracking across high-volume builder portfolios.