Managing Loans with Bay Mountain Capital: Part 2, Draw Requests

Managing Loans with Bay Mountain Capital: Part 2, Draw Requests
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Don’t Let Your Fix-and-Flip Get Held Up by Draw Requests

Draw requests are a big part of fix-and-flip loan fulfillment. They enable borrowers to appropriately fund and complete their projects in a timely manner, maximizing their return on investment. The draw schedule usually has benchmarks toward completion of construction or rehab of the property. This schedule is closely tied to the scope of work and rehab budget. Throughout the process, borrowers work with their asset managers to fill their requests. 


What is a Draw Request?

This is the process by which a borrower gets the funds they’ve been approved for from the lender. Draw requests are honored only for what’s in the construction budget provided with the loan application. Of the total loan amount, there’s usually money allocated to the acquisition of the property and money allocated to construction. When construction reaches certain milestones, a borrower can submit a formal request for reimbursement. Borrowers should submit draw requests only after work has been completed in order to pay contractors for the completed work.


A lender honors draw requests in direct relation to project completion. To keep things simple, let’s say your construction costs are $100,000 and with that money, you plan to add four bedrooms to a property. After you complete one bedroom, you can make a construction draw request of $25,000 because your project is one-quarter complete. If you complete two bedrooms, you can ask for $50,000 or 50% of the approved funds. It’s an effective way for the lender to ensure to protect his funds and investment while still giving the borrower the necessary financial backing to reach his goals. 


The Draw Request Process

Most fix-and-flip loans require multiple requests for funds, however, the schedule of draw requests can vary greatly depending on the project needs. Some borrowers request draws weekly while others request only every two months; each set of circumstances is different. A draw request typically includes a formal request form, as well as invoices and receipts to document the work that’s been done, change orders (if any), banking information for the deposit, and a lockbox code for the inspector to access the property. 

The Bay Mountain Capital loan process requires a third-party inspection to be completed upon every construction draw request. The inspector makes an on-site visit and documents the work that has been done. This report may include photos, as well. The inspector tells Bay Mountain Capital the percent of the rehab budget that can be funded. 

Benefits of Our Draw Request Process

There are a lot of moving parts to a draw request, which can sometimes cause delays. Because our borrowers’ draw requests are handled in-house through dedicated asset managers, our draw request process can be completed in as little as 3-5 business days, keeping your real estate project moving quickly. Our asset managers process the report, arrange for third-party inspection of the project, and depending on the inspector’s report, release a percentage of the funds. This is one of the reasons a detailed rebab budget is critically important to a project. It leaves less to the judgment of the inspector as to whether or not something is 25%, 30% or 50% complete, reducing confusion and frustration. 


Call Bay Mountain Capital today to learn more about how our draw request process keeps your fix-and-flip moving quickly so you can get it to market faster. 

About Bay Mountain Capital:

Bay Mountain Capital has been in business for more than a decade, closing approximately 2,000 loans. We specialize in financing all types of residential and commercial property investments throughout Texas and Georgia. Using common sense and value-added approach, we strive to incorporate these principles into our underwriting and closing processes.

 As a direct lender, Bay Mountain Capital can close a loan within one day after receiving a complete file and clear title. The process generally takes two weeks for a residential loan but can be accelerated where circumstances require it.

 We are primarily an asset-based lender, which means that qualification requirements are limited. Our rates and fees are among the lowest in the industry.

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