# Construction Loans & Draws
A **construction loan** funds the build. Unlike a mortgage, you don't get the money all at once.
## How draws work
- The loan is funded in **draws** as work is completed.
- Each month you submit a **draw request** with backup (pay applications, lien waivers, inspections).
- The lender (often via an inspector) verifies progress before releasing funds.
- The lender holds **retainage** and confirms the project stays "in balance" (enough loan left to finish).
## Key terms
- **LTC / LTV** — loan as a % of cost or value (limits how much they'll lend).
- **Interest reserve** — borrowed money set aside to pay interest during construction.
- **Recourse vs. non-recourse** — whether you personally guarantee the loan.
- **Takeout / permanent loan** — the long-term loan that pays off the construction loan once stabilized.
## Cash flow reality
Draws lag the work, and you fund **equity first**. Manage cash tightly — a draw delay can stall the job.
**Takeaway:** Draws lag the work and you fund equity first — manage cash tightly.
> *Educational content — not legal, engineering, or financial advice. Requirements vary by jurisdiction; always confirm with the local authority and your professional team.*
