Lender and Draw Inspections
A construction loan disburses against progress that someone has to verify. Doing that verification properly requires a person who can distinguish between work that is installed, work that is delivered, and work that has merely been billed.
We provide independent construction monitoring for lenders, equity partners, and funding agencies across Southern California.
Independent verification of what has actually been built
Construction lending risk concentrates in two places: whether the budget was adequate at closing, and whether the work billed each month was actually performed. A well run monitoring program addresses both.
Initial budget and document review
Before the first disbursement, we review the construction budget for completeness and reasonableness, evaluate the adequacy of contingency against the level of design definition, confirm that the schedule is achievable within the loan term, verify permits and approvals are in place or accounted for, and review the construction contract for terms that create lender exposure. Problems found here are correctable. Problems found in month fourteen are not.
Monthly draw inspection
- Site inspection with photographic documentation of actual progress
- Verification of installed quantities against the requested draw
- Review of stored materials, including storage, insurance, and title
- Comparison of cumulative disbursement against percentage complete
- Change order review and budget impact assessment
- Contingency balance tracking against remaining risk
- Cost to complete analysis and loan balance sufficiency
- Schedule progress against the loan term
- Lien release and stop notice status verification
- Written recommendation on the requested disbursement amount
Cost to complete
The number that matters to a lender is not what has been spent. It is whether the remaining loan balance is sufficient to finish. We maintain a cost to complete position each month and flag insufficiency early enough for the borrower to bring equity or restructure, rather than at the point where the project stalls half built.
Distressed and workout situations
When a project is troubled, the lender needs to know what actually exists, what it is worth in place, what it will cost to complete, and what the alternatives are. We perform that assessment and, where the lender takes the asset back, we can manage or contract the completion work through our general engineering contracting practice.
Reporting
Reports are written to be actionable by a credit officer who has not visited the site: current status, disbursement recommendation with the basis stated, exceptions and their materiality, cost to complete, and a clear statement of whether the loan remains in balance.
Lender services scope
- Preclosing budget and document review
- Construction contract risk review
- Schedule feasibility assessment
- Permit and approval verification
- Monthly site inspection and photo documentation
- Installed quantity verification
- Draw request review and recommendation
- Stored materials verification
- Change order and budget impact review
- Cost to complete analysis
- Lien and stop notice status tracking
- Distressed project assessment and workout support
What you receive
Every engagement is scoped in writing before it begins, so you know exactly what is being produced and when.
Preclosing report
Budget adequacy, contingency sufficiency, schedule feasibility, permit status, and contract risk assessment before the loan funds.
Monthly inspection report
Photographic documentation, verified percentage complete by line item, and a specific disbursement recommendation with exceptions noted.
Cost to complete analysis
The remaining cost to finish measured against the undisbursed loan balance, with any shortfall identified and quantified.
Change order impact summary
Cumulative change activity, its effect on the budget and contingency, and whether the loan remains in balance.
Exception reporting
Immediate notification of material issues between reports, including work stoppages, lien filings, or schedule failure.
Workout assessment
On distressed projects, documentation of what exists, its condition, completion cost, and the realistic alternatives available to the lender.
Questions owners ask about this service
How quickly can you turn around a draw inspection?
Typically within three to five business days of the draw request, and faster on established relationships with a regular monthly cycle. We will commit to a turnaround standard in the engagement.
Do you inspect projects outside San Diego?
Yes. We regularly inspect throughout Southern California including Orange, Los Angeles, Riverside, San Bernardino, and Imperial counties.
Can you review the budget before we close the loan?
Yes, and it is the most valuable single thing we do for lenders. An inadequate budget or thin contingency identified before closing can be corrected. The same finding in month fourteen is a workout.
What if we disagree with the borrower over percentage complete?
That is precisely what independent verification is for. We document installed quantities against the schedule of values with photographs, which converts a disagreement about opinion into a discussion about facts.
Talk to us about Lender and Draw Inspections
Send us the project details and we will tell you what a defensible scope of work looks like and what it would cost. Initial consultations carry no fee.
Send us the project
Tell us the site, the scope, and the deadline. Initial consultations carry no fee and no obligation.