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What happens when a contractor’s payment dates don’t match the loan draws?
Fix-and-flip loan draws may depend on completed work and an inspection, while a contractor’s agreement may call for money earlier. How do borrowers check for that timing gap before closing?
I’d want to clarify whether the loan can fund a deposit or only reimburse eligible work after it’s done, how long inspections and draw approvals usually take, and what happens if approval is delayed. If the contract requires payment before the next draw arrives, what kind of backup plan is sensible without leaving too little cash for overruns?
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The reserve should be based on the cash-flow gap, not just the project’s total budget. List the contractor payments that could come due before the next draw might realistically arrive, and make sure available cash can cover those dates. Keep a separate amount untouched for overruns; if covering the payment gap would eat into it, that’s a sign the upfront commitment may be too large for the draw schedule.