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You perform draw processing if your company has a construction loan or line of credit with a financial institution. You can use draw processing for situations in which you receive disbursements of your loan money based on the eligible costs you incur during a given period.
An eligible cost is a cost stipulated in the loan agreement. You receive disbursements for eligible costs after you incur them, up to the total amount of the loan. You generate a draw report to show the eligible costs you incur during a given period.
For example, assume you are contracted to build a large regional airport. The airport is your project, and each subproject within it, such as the construction of the main terminal building, the automated baggage system, the airport access road, and so on, is a separate job.
The main terminal building job can be divided into a number of work items, such as site work, concrete, and masonry. Each work item can be further divided into various tasks. The tasks related to the site-work work item are:
Clearing and grading
Sewer work
Paving and surfacing
You receive a construction loan of 25 million dollars for the main terminal building job, with 3 million dollars designated for the site-work work item. One million dollars in eligible costs exist for each of the site-work tasks.
At the end of a reporting period, you perform draw processing on the eligible costs for the site-work work item. The system generates a draw report that shows the following eligible costs for the period:
250,000.00 against the clearing and grading task
95,000.00 against the sewer work task
55,000.00 against the paving and surfacing task
You submit the report to your lending institution and draw 400,000.00 against the loan for the period.
After you generate your draw report, you can revise its information before you submit it to your lending institution.
Complete the following tasks:
Generate a draw report
Revise the draw