Rehab funds in a fix and flip loan are not handed to you in a lump sum at closing. They are disbursed in stages through a draw process as renovation work is completed and verified. Understanding this process is essential for managing your project cash flow.

The Draw Process

1. Submit a draw request: When a phase of renovation work is complete, you submit a draw request to the lender — typically including photos of completed work and receipts or invoices from contractors
2. Inspection: The lender schedules an inspector (usually a third party) to visit the property and verify the work described in the draw request
3. Approval and funding: Once the inspection is approved, funds are released — typically within 2–5 business days — directly to your account or to the contractor
4. Repeat: The process repeats for each phase of the renovation

Initial Draw Holdback

Some lenders hold back a portion of the rehab budget (often 10%) until the final inspection confirms all work is complete. This retention ensures the project reaches full completion before all funds are released.

Managing Cash Flow

Because draws are released after work is completed, you typically need some working capital to fund work in advance of each draw. Plan for a 1–2 week lag between completing work and receiving the draw. For large projects, this can mean carrying $20,000–$50,000 in bridge liquidity.

First Draw at Closing

Some lenders will fund a portion of the rehab budget at closing — particularly if initial demo or soft costs need to be paid immediately. This initial draw is available when the draw scope is well-documented.