When originating a loan, the overall budget is essential, but so is the projected draw schedule. The standard schedule of draws is monthly. An initial disbursement of funds on Day One of the loan, as defined in the loan terms, will cover purchase or refinance costs as well as reimburse the Borrower for any Work in Progress (WIP). The next draw is scheduled for one month later. Draws may be projected using the Straightline or Manual methods.
Straightline: By default, draws are projected in the Straightline method, meaning that after the initial disbursement, the remainder of the funds are projected to be evenly distributed over the life of the loan.
For example, a 9-month, $1M loan may have an initial disbursement of $200k, followed by projected $100k draws each month for 8 months. A draw is typically not scheduled for the final month of a loan since the project is expected to be completed and sold prior to loan maturity.
For a multi-property loan with different start dates for different properties, the portion of the budget associated with each property is evenly distributed over the scheduled time frame associated with construction of that property.
Manual: Many experienced Borrowers have a more detailed production schedule and can more accurately project the funds they will require each month. In these cases, the draw schedule can be set up manually to match the Borrower’s production schedule and more accurately reflect cash flow and interest accrual throughout the life of the loan.