The Quick Read: Score each lender on turnaround, how work gets verified, per-draw fees, how interest accrues, paperwork per request, and how many open requests it will handle at once. Then weight those scores by how many files you run at the same time. A process that feels fine on one flip can stall your whole pipeline on six.
- A draw is a release of held-back rehab money after the work is verified, so you front the early costs on every active file.
- Delay costs multiply across files, so turnaround and concurrency matter more at volume than any single fee.
- Interest basis, fee schedule, and who gets paid (you or the contractor) change real carrying cost.
- Hard money terms run 6-18 months, so a stalled draw can push you past your exit date.
- The top leverage tier is reserved for experienced investors, and it ties to documented completed projects (5 or more).
What Changes After Five Exits?
Past five completed projects, you stop managing a draw and start managing a draw pipeline. Several files sit at different stages at once, and the lender’s process becomes part of your operating system. Timing, paperwork, and cash needs now stack on top of each other.
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Five is not an arbitrary number. Across the wholesale network where Lendmire places hard money files, the strongest fix-and-flip leverage tier is tied to documented completed projects. At 5 or more, leverage on a non-owner-occupied 1-4 unit property can reach 93% of project cost. At 2 or more it typically runs 90% of project cost, and below 2 it is typically 85%. Every tier is capped at 75% of after-repair value, and all of it varies by lender, property, and experience. Up to 100% of the rehab budget can fund in draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value number.
Hard money is a business-purpose product, and it is not a no-cash-needed product. There is no true 100% purchase program. The structure that gets called 100% rehab financing means the budget is available, but only as work gets done.
| Factor | One active file | Six active files |
|---|---|---|
| Draw delay | Annoying | Multiplies across files |
| Float (your cash out) | One project’s early work | Early work on every file |
| Paperwork | Improvised | Needs a standard package |
| Lender contact | Whoever answers | Needs a named person |
| Fee per draw | Small line item | Real portfolio cost |
Key Terms Defined
Draw: a release of held-back rehab money after the lender confirms a stage of work is complete.
Holdback: the part of the loan set aside at closing for renovation, released in draws instead of up front.
Reimbursement float: the cash you spend on early work before the lender pays you back for it.
Concurrent exposure: the total number of open draw requests and funded files you have with one lender at the same moment.
Date-down: a title check, run before a draw, showing whether any new liens were filed since the last one.
Exit: the sale or refinance that pays off the hard money loan.
How Does a Draw Work, Step by Step?
A draw follows the same basic path at nearly every lender: scope approval, closing, early work you fund, a request, verification, and payment. Differences show up in the details of each step, and those details are what you compare.
1. Scope and budget. The lender approves your scope of work and budget before closing. Work outside that scope may not be reimbursable, so changes usually need a formal change order.
2. Closing. Purchase money goes out. The rehab money stays in holdback.
3. You front the first work. Many investors find the first stretch of renovation runs on their own cash before anything comes back.
4. Draw request. You submit a draw form, invoices or receipts, and photos. Some lenders also want lien releases.
5. Verification. A third-party inspector or a photo or virtual review checks that the claimed work exists. It confirms the work is there, not that it is well done. Partial credit for a partly finished line item is common.
6. Payment. Funds go to you or straight to the contractor, depending on the lender.
7. Final draw. The last release is often tied to closed permits or a certificate of occupancy.
Notice that buying materials does not trigger a draw. Installed work does.
Where Does Draw Discipline Come From?
Private lenders borrow their draw controls from bank construction lending, even though those bank rules do not govern private hard money. The bank framework is still a useful yardstick for what a disciplined process looks like.
The OCC’s previous edition of its commercial real estate lending handbook describes two models. A standard payment plan suits residential and smaller loans, and it most commonly uses five equal installments. The first four tie to inspected stages, and the final payment waits until the mechanics’ lien period expires. A progress payment plan, used for commercial projects, normally holds back 10-20% of each payment.
The current handbook adds three habits. Banks typically require inspection reports with each draw. They have a representative do periodic site inspections. They also confirm the budget stays in balance, meaning enough money remains to finish the job.
Those habits give you a checklist for any private lender: inspection tied to each draw, a lien check before payment, and a test that remaining funds cover work. A lender that skips all three is taking on risk, and some of that risk can land on you through disputes or delays.
What Belongs on a Draw Comparison Scorecard?
A good scorecard turns vague impressions into scored answers. Rate each lender from one to five on every row, then multiply by the weight that fits your volume. At six or more concurrent files, concurrency and turnaround deserve the heaviest weights.
| Criterion | Ask this | Red flag |
|---|---|---|
| Turnaround | What is the written draw timeline? | No stated timeline |
| Verification | Who inspects, and how is it scheduled? | Inspector never confirmed |
| Fees | What is charged per draw and re-inspection? | Fee list only verbal |
| Interest basis | Is interest on drawn funds or full balance? | Answer is unclear |
| Paperwork | Which documents does each request need? | Requirements change midstream |
| Concurrency | How many open requests are handled at once? | One shared queue, no contact |
Two more rows deserve a place even though they don’t fit neatly in a table. First, ask whether funds go to you or to the contractor, because paying contractors directly can simplify subcontractor relationships but changes your control over timing. Second, ask how change orders work. A documented process beats an email chain every time.
The interest basis row is a genuine term-sheet difference. Some lenders charge interest only on funds drawn. Others charge on the full balance from closing. On a file that sits mostly undrawn for a while, that choice changes carrying cost more than most investors expect.
How Do You Turn Draw Delay Into Carry Cost?
Draw delay costs you in two ways. Your capital sits idle while you wait for reimbursement, and your project timeline stretches against a loan term that is already short. Each day of delay costs you the daily carry on that file.
Here is a simple formula: extra days of delay, times daily carry per file, times the number of concurrent files. Say one lender’s draw cycle runs twice as long as another’s, and you have six files open. The slower cycle does not cost you twice as much. It costs you the extra delay on every file, plus the knock-on delays when a late inspection pushes the next stage back.
This is why a lender with a higher fee per draw can still be cheaper overall. Investors who compare only fees miss the carry. Use both, and use your own daily carry numbers, which are the only ones that count.
Hard money terms in the network typically run 6-18 months, interest-only, with no prepayment penalty, all subject to lender, property, and experience. A long run of slow draws can eat a meaningful share of that runway.
How Much Float Do You Need Across Overlapping Files?
Your float is the cash you hold to cover early work on every active file until reimbursements land. The peak need is rarely one project’s worth. It is the sum of every file that sits between draws at the same time.
Map your files by stage to see it. This table is a modeling tool, so fill in your own budgets.
| File | Stage | Float exposure |
|---|---|---|
| A | Demo and framing | High, nothing reimbursed yet |
| B | Mechanicals | Medium, first draw pending |
| C | Finishes | Lower, most draws paid |
| D | Just closed | High, early work starting |
| E | Final punch list | Low, final holdback waiting |
Notice that the worst moment arrives when two files are in early stages and one draw is delayed. Stagger your closings so that not every file starts early work at once. Keep reserve cash for the case where an inspector misses an appointment, because that is when float turns from a plan into a problem.
How Do You Get Quotes You Can Actually Compare?
Send every lender the same one-page deal summary on the same day. Include price, scope and budget, expected after-repair value, your draw schedule, your exit plan, and your completed-project count. Identical inputs give you comparable answers.
Then ask each lender to put the following in writing:
- The draw count and the documents each request requires.
- The fee for each draw and for each re-inspection.
- Whether interest runs on drawn funds or the full balance.
- Who inspects, and how appointments get scheduled.
- Who handles your files and what happens when they are out.
- How the final holdback is released.
Also ask whether the party you are talking to is the actual funder or an intermediary. That answer tells you who controls draw approvals when something goes sideways. For more on that kind of check, see Lendmire’s guide How to Vet a Hard Money Lender Remotely When Exiting to a DSCR Pool.
A broker can compress this process. Because Lendmire places files through a wholesale network across 41 markets, including Washington, D.C., it sees how different lenders handle draws on similar files. Lender behavior changes with borrower volume, and a broker with deal flow across many lenders can show you where your file is likely to land.
How Do You Stress-Test a Lender Before You Commit?
Test the draw process before you rely on it. A term sheet shows you what a lender promises. A trial file shows you what it does.
Start with references. Ask for borrowers who run several files at once, and ask them how the third and fourth draws went, not just the first. Then ask for the lender’s written draw timeline and its fee list. If the answer is a verbal estimate, treat that as information.
Finally, start with a smaller file. Run one draw end to end, with your standard package, before you move a larger pipeline over. A lender that schedules an inspector, answers questions, and pays against verified work on a trial file will probably do the same on the next one. A lender that promises an inspector and never sends one has told you what you need to know.
One Lender or Several?
Consolidating with one lender gets you familiarity, a single contact, and a better chance of improved terms as your history grows. Splitting across lenders gets you redundancy when one process stalls. Neither is always right.
| Approach | Strength | Weakness |
|---|---|---|
| One lender | Faster learning curve, one contact | One bottleneck for everything |
| Two lenders | Backup when one stalls | Two packages and two processes |
| Many lenders | Maximum redundancy | Hard to keep standards consistent |
This is a genuine toss-up for many investors. The consolidated route tends to win when the lender is organized and has capacity for your volume. The split route tends to win when your files are large or time-sensitive, because one slow queue cannot stall everything. A middle path works well for many borrowers: a primary lender for most files and a second relationship held in reserve.
Whatever you choose, standardize your own side. Use one draw package format, one photo standard, one tracker with a row per file, and one rule for how contractors are paid. A kicked-back draw request is a delay you created.
Where Do the General Rules Break?
Several situations break the usual pattern, and each one changes what you should ask.
- Pre-funded rehab. Some lenders require all rehab money in escrow at closing, which means more cash to close. Others advance a portion up front. Ask which structure you are getting before you price the deal.
- Lender pays the contractor. Some lenders remit to you, and others pay contractors directly. Direct payment can protect you from payment disputes but reduces your control over timing.
- Municipal inspections. A failed local inspection stops work, so the draw stops too. City inspections and lender inspections are separate, and you manage both.
- Mechanics’ liens. Contractor liens can take priority over a lender in many states, which is why lenders pay against verified work and check title between draws. The rules are state-dependent, so discuss them generally with your contractors and let your title company confirm the details.
- Ground-up construction. Ground-up files typically run more draws than a cosmetic rehab and carry heavier documentation. Compare lenders on that type of file separately.
- Property type. Hard money in the network covers non-owner-occupied residential property, 1-4 units. Commercial, land, and owner-occupied properties are not offered.
What Does the Exit Look Like When Draws Run Late?
A stalled draw eats the runway you need for the exit. If a rehab runs long, the sale or refinance must still happen before the loan term ends. For many investors, that exit is a long-term rental loan once the property is stabilized.
Lendmire brokers that path through its hard money exit refinance program, and the loan that pays hard money off is a DSCR loan. Here is what a DSCR loan typically allows, subject to lender guidelines and not as a promise. A DSCR cash-out refinance on an investment property tops out at 75% LTV, with about 6 months of ownership measured from title recording. A DSCR rate-and-term refinance on an investment property can reach 85% LTV with no cash back at closing. A DSCR loan generally starts at 1.00 coverage on select programs, with reserves around 6 months of PITIA. The credit floor for a DSCR loan is 620, though most programs prefer a higher score. Select lenders in the network also offer DSCR coverage below 1.00, with leverage and terms adjusted.
One caution applies here. DSCR compares rent to the full monthly obligation of principal, interest, taxes, insurance, and any association dues. Clearing 1.00 does not mean positive cash flow, because repairs, vacancy, management, and utilities sit outside the calculation. Qualification rests primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide walks through the full picture. DSCR loans are designed for non-owner-occupied investment properties, and because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
What Mistakes Do Investors Make When Comparing Draws?
Most mistakes come from comparing the wrong thing.
- Comparing headline fees only. The fee list matters, but the carry from delay often dwarfs it.
- Assuming the inspector checks quality. The inspection confirms the work exists. Quality control is your job.
- Ignoring interest basis. Interest on the full balance and interest on drawn funds are different products.
- Underestimating float. Peak cash need comes from overlapping files, not from the average one.
- Skipping the trial file. A written timeline is a promise. A trial file is evidence.
- Planning the exit last. The refinance or sale needs a start date that survives a few late draws.
If you are buying, rehabbing, or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Tax treatment varies, so consult a qualified professional before relying on any deduction.
Frequently Asked Questions
How long should a draw take?
There is no neutral industry standard, and lender-published figures vary widely. What matters is that the lender states a timeline in writing and meets it. Ask for the written timeline, then check it against references from borrowers running several files.
Who pays inspection fees?
You typically do, either per draw or per re-inspection when work fails. Fee structures differ by lender, and some charge more when you request extra inspections. Get the full fee list in writing before you sign, and multiply it by your expected draws across all files.
Can I have several draws open at once?
That depends on the lender’s capacity and its exposure limits for each borrower. Ask directly how many open requests it handles and whether you get a named contact. A shared queue with no point of contact is a warning sign at volume.
Does volume improve my draw terms?
It can, because lenders tier leverage and pricing by documented experience, and repeat borrowers often negotiate better terms over time. Within the network, the highest fix-and-flip leverage tier is tied to 5 or more completed projects, varying by lender, property, and experience.
What documents slow draws down?
Incomplete packages cause most delays: missing invoices, unclear photos, or absent lien waivers. A standard package for every file prevents most of it. Also confirm that the work being claimed is actually finished, because lenders pay for installed work, not purchased materials.
For current guidelines and terms, see Lendmire’s hard money loan programs page.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. OCC Comptroller’s Handbook, Commercial Real Estate Lending (previous edition)
2. OCC Comptroller’s Handbook, Commercial Real Estate Lending (current)
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Long Each Step of a DSCR Refinance Takes to Pay Off Hard Money · Should a W-2 Investor Scaling Rentals Use Seller Carry With DSCR? · Is a DSCR Loan Better Than a Bank Commercial Loan on a Fourplex?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.