The Current Draw Process
One of the biggest challenges to the development finance process is submitting draw requests to lending institutions. These requests happen frequently and potentially multiple times per project, yet the process can be arduous and inefficient without the proper tools.
The development team is frequently in charge of collecting all project documents from suppliers and contractors and compiling them into a single package. These packages can be hundreds of pages; therefore, it can take significant time.
The documents are meant to provide clear evidence of work that has been completed and support the costs associated with reaching the draw milestone. The draw amounts are based on the cost breakdown for that particular project milestone and follow an agreed-upon schedule at the project’s onset.
Invoices & Receipts
One of the most critical components of the draw request is the invoices and receipts for the work performed during the draw period. These are collected from the subcontractors and suppliers and compiled.
Anytime a change or modification to the original contract with a subcontractor, a change order will arise. The change order provides a detailed description of the changes, including any additional time or costs from the sub. Inevitably, there are always changes, and these must be accounted for.
For most real estate developers, this information is typically trapped in spreadsheets and with various departments in the organization that must be sent back and forth from internal and external stakeholders, allowing room for error or multiple forms of the same document to be in motion at one time. These manual processes can lead to calculation errors which leads to corrections and revisions that add even more time to an already lengthy process.
To make matters worse, each lending institution has specific requirements and how the documentation must be submitted, which can complicate the process further.
Teams frequently need a few weeks to compile a draw request for a complex development project. This doesn’t consider the time spent and loss of productivity corresponding back and forth with management or business partners.
If a lender requests additional information or documentation or the process is delayed, payments are slowed for everyone on the project. So, when submitting the draw request, it’s essential to have all the information accounted for and organized.
These construction finance processes have been executed this way for decades; however, many lenders and developers see improvements to their processes via software digitization and automation.
A Better Solution
Budgetrac Real Estate Development Software can help you quickly produce your loan draw requests. Since the schedule of values and all project data, including all invoices, proposals, contracts, change orders, and receipts, are centralized in one software package and not multiple disparate systems, the draw package is simple to produce.
Budgetrac’s Loan Draw saves significant time in loan document preparation.
Budgetrac aggregates all that data into easy-to-understand dashboards and reports that typically take only a few mouse clicks to achieve. Significant time is reduced in the process and with overall accuracy. It prevents invoices or change orders from slipping through the cracks, reducing delays in funding or the risk of not being funded. Every invoice is tracked in the system, and its loan draw status can be reviewed at any time.
To make things even easier, a template can be set up for each lender’s documentation requirements which ultimately speeds up the entire process.
Your team is likely performing manual tasks that could be automated, increasing efficiency and accuracy. What kind of project savings and returns can you anticipate if you lessen the administrative labor required of your team to produce loan draw packages and let them concentrate on their strengths?
For more Information about Budgetrac or a demonstration of the automated Loan Draw process, please contact us today!