Commercial Construction Draw Schedules & AIA G702 Funding Process
Commercial construction loans do not fund in a single lump sum at closing. Instead, debt proceeds are disbursed in sequential monthly advances based on a predetermined construction draw schedule. To receive funding, developers must execute standard American Institute of Architects (AIA) Document G702 and G703 payment applications, pass independent lender engineering inspections, and deliver verified mechanics lien waivers.
Indicative Underwriting Matrix
Draw timelines typically require 10 to 15 business days from AIA submission to wire disbursement. Plan general contractor payment schedules accordingly.
The AIA G702/G703 Certification Workflow
The foundation of commercial construction disbursements is the AIA Document G702 (Application and Certificate for Payment) and G703 (Continuation Sheet). The general contractor lists every line item in the construction budget (Schedule of Values), detailing original budget, approved change orders, work completed to date, materials currently stored on-site, and retainage withheld.
The project architect inspects the job site and signs the notarized G702 certification, confirming that based on on-site observations, the quality of construction conforms to contract drawings and the contractor is entitled to payment.
Title Date-Downs and Mechanics Lien Waiver Protocols
Before a lender releases loan funds for a construction draw, two critical legal protections must be satisfied:
1. Conditional & Unconditional Lien Waivers: The general contractor and all major subcontractors must provide conditional lien waivers for the current draw and unconditional lien waivers for the previous draw, legally certifying they have been paid in full for preceding work.
2. Title Date-Down Endorsement: The title insurance company conducts a search of county records and issues a date-down endorsement (ALTA 32/33) confirming no mechanics liens, tax judgments, or stop notices have been filed against the property since the previous draw.
Frequently Answered Financing Questions
Verified answers to common borrower and broker inquiries regarding loan sizing, guidelines, and execution.
What is retainage in a commercial construction loan draw schedule?
Retainage is a mandatory 5% to 10% holdback withheld from each monthly contractor draw to create a financial performance reserve until construction is 100% completed.
Retainage protects the developer and lender by ensuring the general contractor returns to complete punch-list items, close out permits, and deliver final lien waivers.
Submit Financing Scenario →What is a title date-down endorsement on a construction loan?
A title date-down endorsement updates title insurance coverage to the date of each draw, verifying that no mechanics liens have attached prior to releasing loan funds.
Without a clean date-down endorsement, an unrecorded contractor lien could gain priority over the lender construction mortgage.
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