Understanding the Draw Process

Loans for construction projects are often funded over the course of the project as costs are incurred. This partial funding of the loan is known as a draw. You perform draw processing if the company has a construction loan or line of credit with a financial institution. You use draw processing for situations when you receive disbursements of the loan money based on the eligible costs you incurred 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 can generate a draw report to show the eligible costs that you incur during a given period.

For example, suppose that you set up a job for which you identified a number of work items, such as site work, concrete, and masonry. Each work item is further divided into tasks, such as:

• Clearing and grading

• Sewer work

• Paving and surfacing

You receive a construction loan of 25 million USD for the job, 3 million USD of which is designated for site work. Of this amount, 1 million USD is for eligible costs for each site work task. 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 these eligible costs for the period:

• 250,000.00 USD against the clearing and grading task

• 95,000.00 USD against the sewer work task

• 55,000.00 USD against the paving and surfacing task

You submit the report to the lending institution and draw 400,000.00 USD against the loan for the period.

The process to generate the final draw report that you send you to the financial institute consists of these tasks:

• Run the Draw Generation program (R51500).

• Enter draw revisions.

• Run the Draw Detail report (R51510).