The Draw Guru

On September 15 I moderated Bisnow’s Both Sides of the Financing Table panel. When I asked Pat Dempsey, Senior Managing Director at Walker & Dunlop, what operational changes he’s seeing on the lender side, he described the experienced person at every bank who gets draws funded, and said that person, the Draw “Guru”, is being replaced by technology. Then he said the part that really stood out to me: “developers have to learn how to process draws using technology.”

That’s the developer’s half of the change, and it’s the half I want to write about. A developer can’t control how fast a bank reviews a draw. Everything the panel said about getting draws funded on time from the borrower’s side came down to process, and that process starts at the closing draw.

Rates, land, and capital decide whether a project gets financed. What happens after closing decides whether it gets built on schedule.

Lenders Are Leading the Change

Dempsey’s description, on a panel my company sponsored, was specific: “there’s [a] …person who’s a very experienced draw processing person at every bank, and that person is the guru for getting those deals, and the draws processed, and getting the cadence right, and getting everything handled, so that money gets back to the developer and the subs.” He added that the “person handling a draw is being replaced by technology and software, and AI.”

He said the change “requires, developers and operators to be savvy on the technology side,” that “lenders are forcing that change on the customers,” and that “some of our customers are not there yet.”

He’s right, and I’ll leave how a bank reviews a draw to the people who do it. What I can speak to, after 22 years working directly with owners, developers, and contractors, is what the borrower controls. Two panelists laid it out better than I could: Derek Hammond from the borrower’s seat, and Michael Murphy, who has spent time  on both sides.

What a Stalled Draw Costs the Developer

Derek Hammond, Chief Financial Officer of Flaherty & Collins Properties, described the borrower’s side plainly: “if a draw is not funding, then that just leads to a whole host of issues between subs stopping work, liens, delays in ordering materials, and then obviously maybe owners need to fund to bridge the gap for that timing.”

I see this impact underestimated when I speak with developers. None of that shows up as a line item. The draw that hasn’t funded isn’t accruing interest yet, which may be part of why the cost gets underestimated. It shows up later in the schedule.

The math on one week

Take an illustrative $40 million construction loan with $30 million drawn, at 7.5%. If a stalled draw stops two trades for a week and pushes completion by that week, the project carries the drawn balance a week longer at the end of the job: $30 million times 7.5%, divided by 52, is about $43,000. That’s before general conditions run another week and before any equity goes in to keep subs working. And you’re one week further from NOI. Every input is illustrative, so rerun it with your own loan.

Cadence Starts at the Closing Draw

When I asked Hammond what operational changes developers need to make, he started with cadence. “Establishing a good cadence up front with the closing draw, and then the next draw, is probably the key,” he said. “Anytime there are different sources of funds, there seems to be hiccups that cause delays, so I’d say focus on process and establishing a good cadence up front.”

The different sources are the point. Earlier in the hour he’d described how his company builds a capital stack. “We’re okay with full recourse, so we’ve really found our success focusing on local, regional banks,” he said, and on their public-private partnership deals “the incentives will kind of help fill some of that capital stack, and then we’ll round that off with the equity.” Every source in that stack has its own requirements and its own timing. The first draw sets the pattern for how they line up every month after it, which is why Hammond called it out first. .

One System, One Set of Numbers

Hammond said his team is “hyper-focused” on “maximizing software’s ability to manage the process,” and that starts with one platform. “It’s really getting everyone to the same system, so we’re all in the same alignment,” he said. His team uses e-signature as a gate in the workflow: once a step is signed off, it moves to the next one.

He also pointed to integrating budget management with accounting for construction contracts and change orders, which “eliminates the need to reconcile two systems.” For anyone who’s closed a draw, that’s the month-end work that holds a package up. The budget says one thing, the books say another, and somebody has to find the difference before the lender does.

He was candid about AI, too. His team is early, and the lesson so far is that “you need to make sure you’ve got the right source of data.” A draw package built on two sets of numbers won’t get better because software touches it.

Tell the Lender Before the Draw Does

Michael Murphy, Vice President of Credit Investments at Davis, has sat on both sides of the table as a borrower and a lender, and he named what lenders now negotiate before closing. Sponsors want to buy off-site stored materials early “to avoid the uncertainty around tariffs,” and lenders look at “percent bought-out levels prior to closing or funding, and then what’s the contingency look like?”

Each of those becomes a question on a future draw. Stored materials need support before they’re funded. A low buyout means more pricing risk in later pay apps. A thin contingency means every overrun is a conversation.

Murphy’s fix is transparency. “Bring us in with changes, even if they’re, you know, not fully vetted out, just to help us understand and be up to speed is key,” he said. A lender who hears about a budget change at the same time as the draw that bills it has to stop and absorb it. His broader point was that “the lender and the developer should think about being on the same team.”

Where Software Helps the Developer’s Side

The lenders Dempsey described are asking borrowers to submit draws differently, and the developers who adjust first get funded faster. On our platform, the owner’s team approves invoices against the budget, pays compliant contractors, collects lien waivers along the way, and packages the draw with the compliance documents attached, so it goes to the lender in one submission and the lender is notified when it lands. Our draw and budget workflow for owners and developers gives everyone on the project the same system and the same numbers Hammond described.

What Developers Can Do Before the Next Draw

1. Set the cadence at the closing draw, with every funding source in the stack: who needs what, by which date, each month.
2. Put the GC, your team, and the lender’s requirements in one system, with sign-offs that move each step forward.
3. Reconcile the budget and the books before the package goes out, so the lender never finds the difference first.
4. Document stored materials, buyout, and contingency early, because each one comes back as a question on a draw.
5. Tell the lender about budget and design changes when they happen, before the draw that bills them.

Technology will take a lot of the draw off people’s desks. It won’t replace the experience and the relationships on either side of the table, and that was the one theme every panelist came back to. Hammond’s version is the one I’d frame: “lenders are going to lend, developers are going to develop, how do we work together to get this thing to the finish line?”

45 of the top 100 US banks are active on our platform, across residential, commercial, homebuilder, and private credit, so there’s a good chance your lender is already asking for draws this way.

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Construction Draw Funding FAQs

What happens to a project when a construction draw doesn’t fund on time?

Subs can stop work, liens can be filed, material orders slip, and owners often fund the gap from equity, as Derek Hammond of Flaherty & Collins described on the September 15 Bisnow panel. The largest cost is usually schedule: each week of delay extends interest on the drawn balance at the end of the job. There’s also the cost of ongoing general conditions and delayed income.

How can developers get construction draws funded faster?

Set a cadence at the closing draw across every funding source, keep the team and the lender’s requirements in one system, reconcile the budget and accounting before submitting, and tell the lender about changes early. Those were the practices the borrowers and lenders on the panel agreed on.

How are lenders changing the construction draw process for borrowers?

Lenders are moving draw submission and review into software and asking borrowers to submit through it. Pat Dempsey of Walker & Dunlop said developers “have to learn how to process draws using technology” and that some borrowers aren’t ready yet.

What do construction lenders look at before closing that affects future draws?

Michael Murphy of Davis named off-site stored materials, percent bought-out levels before closing or funding, and the size of the contingency. Each one becomes a condition or a question on later draws.