Are Draw Delays Hurting Flip Margins?

Question

How are investors protecting timelines when working with bridge lenders?

Doug Smith · Answer

I think the big question to ask is what process your lender uses for the draws? Do they use a third party like Granite or do they manage the process in-house? Do they use an ap of some sort with geo-tracking or do they send an inspector out. Do they do this type of loan a great deal? From your perspective, are you sticking to your own timelines and providing timely draw requests? Is the work your doing correct and complete or are you ordering draws before the work has been completed for that particular draw? If you're working with a professional, seasoned bridge lender and you're doing what you need to do for each draw request, then there's a good chance you won't have an issue.

Bo Smith · Answer

Draw delays are absolutely brutal. I had a bridge deal last year where the lender sat on a draw for 17 days -- not because there was an issue, just slow processing. By the time I got funded, my contractor had moved to another job and couldn't come back for two weeks. Those 30 days of extra carrying costs ate about $8k from my profit. Now it's priced into every deal I underwrite.

The real protection is in your lender relationship. I switched from a big national bridge shop to a smaller local lender who's faster with draws. Yeah, their rate is maybe 50-75 bps higher, but the speed more than makes up for it. I also make sure my GC knows the draw schedule upfront and we coordinate inspections to hit their timelines, not the other way around.

Another angle: some flippers are building a small cash reserve specifically for draw gaps. Instead of funding everything via the construction loan, I keep $15-20k liquid and can front contractor payments if needed, then get reimbursed at the next draw. It's not ideal, but it keeps the job moving and kills that timeline bleeding.

What type of bridge are you using? Hard money, or an actual construction bridge?

Lipa F. · Answer

A lot of lenders doing 24-48 hours from draw request with no delay by accepting snap pictures in my experience

Bo Smith · Answer

Absolutely. Bridge lenders are tightening draw schedules because they're seeing their own cost of capital go up. If you're relying on the lender to fund rehab as work gets done, you're now looking at 7-10 day delays between draw requests and funds hitting your account. In a compressed market where you need to move fast, that tanks your timeline and forces you to hold longer.

The real protection is pre-closing estimates that are bulletproof. I require my GC to give me line-item estimates that map exactly to the draw schedule we negotiated with the lender upfront. No surprises. Then we build in a 10% contingency and hold it in reserve. You don't fund every requested draw dollar-for-dollar -- you fund based on actual completion milestones, not just contractor ask.

Second, lock your construction timeline into the loan terms. If your lender says they'll fund for a 4-month rehab, you get that in writing. Draw schedule is tied to that timeline. If you overrun, you're paying extension fees or higher interest -- and that eats your margin. So you budget tight and you execute tight.

What's your typical flip timeline, and are you running into situations where the draw delays are actually extending your hold period?

Are Draw Delays Hurting Flip Margins?

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