Transcript:
A commercial draw inspection is used to ensure the lender, contractor, and site owner are aligned on the construction progress and financial investment of a commercial construction project.
About Construction Lending
A construction loan holds the funds required to cover the cost of the project in an LIP account which is disbursed to the contractor based on a percent of construction completed as the project progresses.
- The lender advances funds for construction, with the site owner generally paying the interest-only portion of the loan until construction is complete.
- The site owner provides a budget to help the lender track how much money has been advanced from each line item in the budget.
- An AIA is a commercial construction contract that helps set the draw schedule in determining when funds are disbursed. The schedule is agreed to by the site owner, the lender, and the contractor.
Purpose of Construction Draw Inspection
A professional inspector visits the construction site to assess progress and helps to mitigate risks inherent to the lender by confirming construction has progressed in line with the amount of funds disbursed, to ensure the asset is sufficient as collateral on the loan.
The role of the draw inspector is to:
- Show where the project is in relation to the timeline that was set out
- Check the accuracy compared to the original draw request
- Review the budget
The draw inspection includes:
- Site Verification
- Photos
- Detailed review of the AIA and project budget
- Confirmation of invoices and onsite materials
- Comments or concerns
- Estimate of percent complete
Based on the findings of the draw inspection, the lender can validate the draw request, disburse the right amount of funding, and ensure that the funds do not go beyond what is needed by the project.
Selecting a Draw Inspector
A professional draw inspector is crucial to the success of any commercial construction project, ensuring the lender, the site owner, and the contractor are all protected, adequately funded, and remain on schedule.
McSteen
Land Surveying | Draw Inspections | Utility Locating
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