Reconcile the request to the loan budget
Distinguish the contractor’s payment application from the borrower’s draw request: they can cover different costs and approval requirements. Map the requested advance to approved loan-budget categories and identify excluded, unsupported, or previously funded items. Maintain a reconciliation between the current request, prior disbursements, and remaining availability.
Review progress and remaining completion risk
The OCC’s construction lending guidance discusses inspections, disbursement controls, liens, and the adequacy of funds to complete. Apply the institution’s policy and loan documents to the specific draw. An inspection supports progress review; it does not by itself establish that every requested cost is eligible or that all funding conditions are satisfied.
Make change exposure part of the review
Our recommended draw note separates approved budget changes, pending proposals, disputed amounts, and identified but unpriced work. Ask what each would do to the completion forecast and who would fund the difference. A balanced original budget can become insufficient even when the current invoice package is mathematically correct.
Use a decision record that survives a handoff
Record the requested advance, reviewed amount, outstanding conditions, evidence references, decision-maker, and actual disbursement. Keep inspection observations, borrower explanations, and internal approval distinct. If an exception is accepted, document the rationale and authority according to bank policy. Do not turn an unresolved condition into a green status simply because another reviewer has finished.
Example: a complete package with a funding gap
Assume the latest completion forecast is $2.4 million and identified eligible funding remaining after this draw is $2.1 million. The $300,000 gap needs reconciliation even if every invoice in the current request is supported. Confirm that the forecast and funding use the same scope, date, and treatment of reserves before drawing conclusions. This is an illustrative control question, not a lending decision.
Keep this handy
Review checklist
- Draw mapped to eligible loan-budget categories
- Inspection and required conditions reviewed
- Completion forecast reconciled with remaining sources
- Approval and actual disbursement recorded separately
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Sources & scope
These references inform the document and workflow context. Checklists and examples are BuildProof’s editorial recommendations. The executed agreement, applicable law, and authorized project decisions control.
AIA and its document names are trademarks of The American Institute of Architects. This independent guide is not an AIA form or an endorsement. Obtain licensed documents when required. Educational guidance only; it does not replace project-specific legal, financial, or professional advice.
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