HML Draws

Just kind of curious about the draw process of the hard money loan any advice would be great.

Is it fairly easy to get the draw in a timely manner?

Do they require reciepts when requesting draws or can you just say that 6k is needed for the foundation company even if the bill is only 5.5k?

They are all different.

Usually the number of draws is dictated by the renovation costs. It usually runs between 3-6 draws, more draws for higher costs.

Some will front you the money to get started based on reasonable cost estimates then you continue to ask for more money as the next phase comes around. Everything should be documented and verified to prevent fraud accusations. These lenders obviously won’t require receipts but rather the invoices.

Most will want the borrower to front the money and then each draw is a reimbursement for the initial outlay. You just put your money in, take it out, put it in, take it out, put it in, take it out (keep your minds out of the gutter). These lenders will want to see receipts to know exactly what you should be reimbursed for.

Some like pictures, others dispatch an appraiser or home inspector to do progress inspections to make sure your not at home typing up receipts or invoices and keeping their money. Draws are pretty simple and quick for even conventional lenders. Don’t take advantage of their flexibility or over-finance with hard money, it could get ugly.

Thanks Danny,

The lender said that when I need a draw I submit the request form, he personally goes to the property looks to see if the work is completed and then wires the money (usually all this happens in 24hrs.) It just sounded a little too easy to me, I am just rying to be cautious he doesn’t even ask to see invoices. Seems that a person could get themselves into trouble pretty fast with this much money available to them just one phone call away. BTW we are going to refi this thing the second we get it rehabbed.


That’s one of the benefits of working with a private HML. They usually have done this long enough to recognize when someone is making the repairs or not.

My hard money lender wants an estimate for work needed and will release funds upon an inspection of work completed as I ask. Lets say that part of the estomate is 2k for demo and clean up, after demo and clean up is done I can request for them to pay my 2k draw they have their inspector inspect to make sure it was done and then they give me 80% of the amount requested.

Why do they only give you 80% of the money requested?

Some lenders will have you pay for a Draw Inspection. This is an actual inspector that comes out to see if the repairs have been done, reports back and a proper amount is released.