Construction Loans That Fund Draws Before the Work Starts
Ask most lenders how a construction loan pays out and you will hear the same word: reimbursement. You pay your crews. You submit receipts. You wait for an inspection, then a check. Your money floats the build, and the loan pays you back.
There is another way to structure it, and builders who find it rarely go back.
What is an advance-draw construction loan?
It is a construction loan where each draw funds before the phase of work begins, not after it is finished. Your concrete sub gets paid when the pour is scheduled, not a month after it cured. At Kenwood this structure is called Fund Forward, and it is how we fund ground-up construction across Arizona.
The difference sounds small. On a jobsite it is the whole game. With reimbursement, the builder fronts every phase from his own account and waits to be made whole. With advance draws, the capital is in place when the crew shows up, and the builder’s own cash stays free for the things a budget never predicts.
How do the draws actually work?
The draw structure is shaped around the build, not pulled from a form. Two common shapes:
A series of advance draws. Before each phase starts, that phase’s money is disbursed. A local inspector confirms progress as the build moves. Interest accrues only on what has actually been disbursed, so you never pay for capital that is not working yet.
Staged tranches. Capital is set aside in stages, and a future tranche costs nothing until you call for it. A builder who will not need the second half of his budget until framing has no reason to pay interest on it while the pad is being graded.
Which shape fits depends on the schedule, the budget, and how the contractor likes to run a job. That conversation happens before the loan is made, not after.
What does this look like on a real Arizona build?
An owner-builder in the New River area came to us with land owned free and clear and a ground-up plan. We funded $485,000 at 59.5 percent of the finished value, structured in two tranches. His draws advanced ahead of each phase, a local inspector confirmed progress, and the second tranche sat at zero interest until the build reached it.
He never floated a phase out of his own pocket, and he never paid for capital he had not called for. That is the structure working the way it is supposed to.
Can the loan cover 100 percent of construction costs?
If you own your land outright, yes, it can. Land owned free and clear is real equity in the deal, and with that equity in place we can fund up to 100 percent of hard costs. Your land is the down payment. Your cash stays liquid for the build.
Program ranges for ground-up construction at Kenwood run up to 80 percent of cost and up to 70 percent of the finished value, secured by a first position deed of trust. Every deal is priced on its own fundamentals, so those are ceilings, not promises.
Who is this for?
Arizona builds only, with an Arizona ROC-licensed contractor on the job. Bring your builder, or a builder you are vetting, and we underwrite the team along with the numbers. What we read: the budget line by line against what things actually cost in this market, the contractor’s track record, and the exit. Sale or refinance, the numbers have to work at the finish, not just the start.
Loans run $50,000 to $5,000,000 on Arizona investment real estate. The person who reads your plan is a principal who has underwritten this state’s property for more than 30 years, and the person who answers the phone is the person who decides.
If you have a lot, a plan, and a builder, the fastest path is a phone call: describe the deal out loud and we will tell you what we see. (480) 783-8800, or get a funding answer in about two minutes.