- Rehab money sits in a holdback and is released as reimbursement for finished, inspected work. You pay for each phase first, so plan working capital.
- Lenders published draw turnaround of 24–48 hours in October 2026, with same-day options for photo or virtual inspections. Incomplete requests are the usual cause of delay.
- Ask whether interest accrues only on drawn funds. On our $312,000 example, full-loan interest costs $1,794 more over seven months, the same as paying 11.34% instead of 10.25%.
- Change orders need approval before the work starts. Scope beyond the approved budget is usually your cash, not the lender's.
In the fix and flip draw process, the lender funds the purchase at closing and holds the renovation budget back. You do the work, pay for it and request a draw. An inspector, or your own photos, confirms the work is in place, and the lender wires the money for those line items. Lenders published draw turnaround of 24 to 48 hours in October 2026, and several of the national ones charge interest only on funds you've drawn.
The holdback is loan money you can't touch until the work is in place
A fix-and-flip loan has two parts. The purchase portion funds at closing: 85–100% of the price, depending on the lender and your experience, in programs published in October 2026. The rehab portion, up to 100% of the approved budget at Kiavi, Lima One, RCN, LendingOne, Roc, Civic and Easy Street, goes into a holdback, sometimes called a construction escrow, and is released in stages.
Draws are reimbursements, not advances. Kiavi's draw guide says work must be completed, installed and paid for before funds are released, and Lima One ties each draw to completed budget line items. Some lenders also keep back part of every draw until the job is done; Kiavi's guide says most lenders cap pre-final draws at 90% of the holdback.
The scope of work and budget set the rules for every draw
Before closing, the lender reviews your scope of work (SOW): a line-item list of what you'll do and what each item costs. Lima One has a construction analyst check that the budget is enough for the plan and looks at your contractor's experience; Kiavi sends the SOW to a feasibility team. After closing, every draw is measured against those lines, and work that isn't in the scope may not be reimbursed.
Write the budget the way you'll draw it. Split big items into stages an inspector can see, such as rough and finish electrical, and group the lines into milestones you can finish and photograph.
| Draw | Work completed | Amount | Holdback drawn to date |
|---|---|---|---|
| 1 | Demolition, roof, rough plumbing, electrical and HVAC | $34,000 | $34,000 |
| 2 | Windows, insulation, drywall | $22,000 | $56,000 |
| 3 | Kitchen and bathrooms | $28,000 | $84,000 |
| 4 (final) | Flooring, paint, trim, punch list | $12,000 | $96,000 |
Swipe the table to see every column →
A draw request is a package, not an email
Lenders take requests through a borrower portal, an app or the draws team, depending on the program. A complete request usually has five parts:
- The loan number, the property address and the line items you're claiming, with the percentage complete on each.
- Photos of every claimed item, or access for an inspector.
- Invoices or receipts that support the amount. On Kiavi's standard draws, paid invoices must equal or exceed the draw.
- Lien waivers from the contractors and suppliers you paid. Kiavi wants them to match the invoices on standard draws, and on the final draw in its streamlined program.
- A current loan. Kiavi won't release a draw while a monthly interest payment is past due.
Expect a fee on each draw, taken out of the wire. Kiavi and Lima One both charge one but didn't publish the amount, so get it on the term sheet and multiply it by the number of draws you plan.
Three kinds of inspection, three different speeds
| Method | How it works | Published speed | Watch for |
|---|---|---|---|
| In person | A third-party inspector visits and compares the work with the budget | Depends on the inspector's schedule | Leave access; the visit, not your request, starts the clock |
| Photo (app) | You upload photos of the finished work from your phone | As little as one business day (Lima One FastTrack); same day possible (Kiavi mobile) | Unclear or missing photos mean resubmission; Kiavi limits it to eligible borrowers |
| Virtual | A remote walkthrough reviewed by the draws team | Same-day draws (LendingOne) | Ask what the reviewer must see before you start |
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24–48 hours is the published target. Your file sets the real number.
In October 2026, Lima One advertised 24-hour draws, Easy Street a 48-hour fastest turnaround, and LendingOne same-day virtual draws. Those clocks start when the lender has a complete request and a passed inspection, not when you send the first email. On site visits, add the time it takes to get an inspector out.
The interest method can matter too. Ridge Street Capital wrote in October 2026 that draws on loans with as-disbursed interest often take 2–5 days longer than draws on loans that charge interest on the full amount. Ask each lender for its typical turnaround, not the advertised best case.
Interest on drawn funds only: what it saves, and how to check
Lenders charge interest on a rehab loan one of two ways. As-disbursed interest, also called non-Dutch, accrues only on money actually advanced, so the undrawn holdback costs nothing. Full-loan interest, called Dutch, accrues on the whole loan from closing day, holdback included. Lima One, LendingOne and RCN published that they don't charge interest on undrawn rehab funds.
Take a $240,000 purchase with 90% financed ($216,000 at closing) and the $96,000 budget above, drawn at the end of months 1 to 4. The total loan is $312,000 at an assumed 10.25%, just under the 2025 median of 10.45% for non-bank short-term investor loans. The house sells at the end of month 7.
| Month | Drawn balance | Interest on drawn funds | Interest on full loan |
|---|---|---|---|
| 1 | $216,000 | $1,845 | $2,665 |
| 2 | $250,000 | $2,135 | $2,665 |
| 3 | $272,000 | $2,323 | $2,665 |
| 4 | $300,000 | $2,563 | $2,665 |
| 5 | $312,000 | $2,665 | $2,665 |
| 6 | $312,000 | $2,665 | $2,665 |
| 7 | $312,000 | $2,665 | $2,665 |
| Total | $16,861 | $18,655 |
Swipe the table to see every column →
Full-loan interest costs $1,794 more here. Put another way, 10.25% on the full loan costs the same as about 11.34% on drawn funds, because the average drawn balance is $282,000, not $312,000. The gap grows with the size of the holdback and the length of the rehab. Ridge Street also notes that some lenders quote a higher rate for as-disbursed interest, so compare total interest in dollars, not the headline rate.
Why draws stall, and the fix for each
- Claiming unfinished work. Ask for the whole kitchen before the countertops are in and the line gets cut or the draw bounced. Claim what's installed.
- Photos that don't show the line item. Shoot each claimed item wide and close, with something that ties it to the property. Resubmissions restart the review.
- Paperwork that doesn't tie. Invoices that don't add up to the draw, or lien waivers that don't match the invoices, hold up standard draws.
- Work outside the scope. Unapproved changes can block access to the holdback until a change order clears.
- A late interest payment. It can freeze draws until it's paid.
- A lien on title. A mechanic's lien from an unpaid sub can stop the lender until it's released, which is why lenders ask for lien waivers.
- No access. A locked house or a missed inspection adds days you won't get back.
Change orders: approval first, then the work
Plans change once the walls are open. Kiavi requires a formal change order, approved by its feasibility team before the work begins, and warns that unapproved changes can limit access to the holdback. Most change orders move money between lines rather than add it: find rot under the bathroom floor, add $4,000 to framing and take $4,000 from the flooring upgrade. If the total goes up, expect to fund the increase yourself unless the lender agrees to modify the loan.
Keep a running sheet for every line: original budget, approved changes and amount drawn to date. It's the first thing a draws team asks for when the numbers don't tie.
The final draw releases what's left, once the file is clean
The last draw pays out whatever remains in the holdback, including anything held back under a pre-final cap. With a 90% cap on the $96,000 budget, draws before the final one can't exceed $86,400. In the example, draws 1 to 3 total $84,000, or 87.5% of the holdback, so the cap never bites. Front-load the schedule, say $90,000 of work finished before the last draw, and $3,600 waits until the job is complete.
Lenders want the final draw to close out the file: every line complete, the punch list done and lien waivers from everyone you paid. Kiavi asks for final-draw lien waivers even on its streamlined program. Order the final inspection as soon as the punch list is done, so the last of your money isn't still in the holdback when you list.
Pay contractors on a schedule that matches your draws
If your contract terms and your loan's draw terms don't line up, you finance the gap. Five rules keep them aligned:
- Tie progress payments to the milestones in your draw schedule, so each payment you make comes back in the next draw.
- Keep deposits small. An upfront deposit is your cash until the work it pays for is installed and inspected.
- Match retainage. If the lender holds back part of each draw until completion, hold back the same share from the contractor.
- Collect a lien waiver with every payment: conditional before you pay, unconditional once the money clears.
- Ask who gets the wire. Some lenders pay the borrower and others pay the contractor directly.
Rehab loans with draws are made for investment property only, never a house you or a family member will occupy. If you'll live there, that's a residential mortgage, with its own rules.