How Construction Loan Software Fast Tracks the Construction Draw Process
Historically, construction loan management was a manual and labor-intensive process, prone to errors that could disrupt project progress at any stage. Fortunately, better solutions now exist. The technology sector is actively investing in construction to boost efficiency and profitability. The increasing digitization of the construction industry is gradually mitigating the challenges that construction capital partners have faced for decades. A more straightforward and streamlined approach to loan administration is rapidly becoming the standard. Here’s how construction loan software helps to expedite the construction draw process.
Understanding a Draw Request
A draw request is a package of documents including invoices, receipts, PDFs, and lien waivers submitted by a borrower on a regular basis to “draw” funds from a construction loan. A draw request supports and validates completion of an agreed-upon amount of work, and includes invoices from subcontractors expecting timely payments.
The construction loan draw process consists of three major parts:
- Collecting data and documentation
- Obtaining approvals
- Distributing payments
Each of these parts is crucial in ensuring a smooth construction project from start to finish in which the borrowers, contractors, and the capital partners are satisfied.
However, these these tasks involve countless hours, manual data entry and inspection, and of course, the risk of someone making a mistake that can bring the entire project to a halt. The journey from draw submission to payment can be quite long.
The life of a draw request is a long and arduous one. In fact, 82% of contractors say they wait more than 30 days to get paid for their services. That’s a long time, and it doesn’t do much to optimize the productivity or efficiency of the project.
How Loan Management Software Helps
Asking for a capital partner to cover the costs of each individual milestone in the project is not as simple as one might think. In fact, the invoice needs to undergo rigorous scrutiny at every step of the process in order to make sure that the work was actually completed, the work justifies the amount, and all the supporting documentation is in order.
The invoice moves from the subcontractor to the contractor, and then onwards to the developer, and is then taken over by the bank, with every party required to confirm that the work for this phase of the project is complete. But that’s not all. The construction process is a fluctuating one, and it’s not enough to simply confirm that the job is done. Instead, the construction draw request needs to fall in line with budget expectations. What’s more, in order to avoid a mechanic’s lien, every invoice should be accompanied by an unconditional lien release, as well as the necessary insurance, bonding, permit, and license information.
As you can tell, the sheer number of interested parties, along with the time it takes to process everything, can be time-consuming and frustrating. However, with the use of construction loan software, you can aggregate all of the information from countless emails and PDFs, automate various processes, avoid human error, and ensure your projects move toward lien-free completion.
Construction loan software helps capital partners quickly answer common questions including:
- Is this invoice for this project?
- Has this invoice been invoiced before?
- Is the invoice within the contract amount?
- Is the project within budget?
- Does the invoice have the correct documentation?
- Is the project on schedule?
The premise is simple: the problems that would take a human being hours to solve, or questions that would take days to answer, can all be resolved in a few minutes with centralized and automated data. With software to assist, construction lenders spend less time looking for answers and more time keeping projects moving.
In a world where maximizing ROI is the name of the game, no one can afford to wait 30 days to process something that should be approved in a matter of minutes. Learn more about how Rabbet Construction Finance can help expedite your construction draw request process.
