Tag: Progress payments

Progress Payments: What Lenders Look for when processing drawdown Requests

When it comes to property development and construction finance, progress payments form the backbone of how funds are advanced throughout a project. For lenders like ASAP Finance, this is one of the most critical aspects of loan management – ensuring funds are released only as value is created on site, and almost always on a cost-to-complete basis.

The Basics of Progress Payments

A progress payment or “drawdown” (also known as a DD) refers to the staged release of loan funds throughout the construction or subdivision process. Rather than advancing the entire facility upfront, funds are released progressively as the project reaches agreed milestones. Note, payments are almost always made on a cost-to-complete basis (which we’ve covered in a previous blog How Cost-to-Complete Funding Works in Development ).

This structure ensures borrower equity is applied first to the project and that the lender’s loan facility is sufficient to complete the project.

What Lenders Look for in Drawdown Requests

Every drawdown request is assessed on a simple principle: “after paying the DD request, is the amount being retained by the lender sufficient to complete the project?”.

While there are a range of other considerations when making a payment, the lenders final decision will eventually tie back to that fundamental question.

Consideration for Lenders

Before approving a drawdown, prudent lenders will typically consider the following. In most cases, an independent Quantity Surveyor (QS) report will also be required, which addresses many of these points in greater detail.

• Budget review: the lender will review the full project budget to identify any areas where cost increases are known or anticipated. The aim is to ensure that after the requested payment is made, the lender remains sufficient funds on a cost-to-complete basis. This includes confirming appropriate allocation of contingency sums and factoring in forward-looking costs that may not have been fully identified early in the project.
• Evidence of progress: the lender may go to site or request photos confirming works done.
• Invoices from the main contractor and relevant subcontractors: for the raw build, some lenders may not require individual subtrade invoices and instead pay per the agreed milestones (however a QS will almost certainly ask for sub trade invoice and confirmation that all previous invoices have been paid)
• Program: lenders will assess whether the project remains on track against the approved program. Delays often translate directly into increased costs, this is because capitalised interest and fees form part of the overall funding facility and budget. If the revised completion date extends beyond the original term of the loan, the lender may require evidence that the borrower can cover any resulting shortfall, which may include an additional equity injection.
• Council inspection signoffs: Evidence that key council inspections have been passed, such as drainage, pre-line, or pre-roof stages. These provide independent verification that works completed on site meet the required building standards and align with the approved plans.
• Cost over-runs: If a drawdown request exceeds the value of the completed work, the lender may only approve a partial payment. This protects the lender from over-exposure if delays, defects, or cost overruns occur later in the build.

Site visits

As mentioned, expect your lender to undertake a site visit. Site inspections are an important step, providing a real-world check against what’s claimed on paper. They also give the lender valuable insight into the quality of workmanship and general site activity. A well-organised, well-resourced and active site signals good project management, while disorganisation or inactivity can indicate emerging risks, unpaid bills or potential delays.

Council Inspections

Council inspections play a critical role in the progress payment process, serving as an independent safeguard for both lender and borrower. Each passed inspection verifies that the works completed meet building code requirements.

In a residential build, inspections typically cover key stages such as foundations, framing, and pre-line etc. while subdivision elements focus on civil works such as earthworks, utilities connections, retaining, drainage and driveway (including vehicle crossing) sign offs.

These inspections provide independent assurance that all works are compliant and completed in line with approved plans. They also help confirm there are no outstanding or remedial items that could undermine the project’s cost-to-complete position or the security of the loan.

Greenfield Land Subdivisions

Green field subdivisions carry their own complexities. Unlike infill projects, where subdivision works are relatively minor and progress can be tracked through defined structural stages, greenfield projects centre on extensive civil and infrastructure works.

Because of this, milestone-based drawdown structures are often impractical. Lenders instead rely on engineering certificates and supporting invoices to verify progress and authorise drawdowns. Given the scale and variability of such works however, QS reporting is almost always required to maintain oversight and cost control.

ASAP’s Milestone-Based Approach

Unlike traditional banks, ASAP Finance does not require QS reports to fund most projects. Instead, we take a pragmatic, milestone-based approach that streamlines the process without compromising oversight.

Our progress payment schedule is typically structured around clear, definable stages such as foundation, framing, roof on, lock-up, interior completion and so on. Each milestone would correspond to a known percentage of total build cost, making it easier for developers and builders to forecast cashflow and align payments with real progress.

By removing the QS requirement, projects move faster, incur fewer third-party costs, all while maintaining robust checks and balances through council inspection reports and site verification.

Why Lenders Take It Seriously

A disciplined drawdown process is about more than just compliance – it’s about protecting project viability. By linking payments directly to verified progress and the project’s broader cost-to-complete position, developers maintain stronger control over cashflow, lenders safeguard their exposure, and projects stay on schedule.

ASAP Finance’s model strikes the right balance between efficiency and oversight, ensuring funds are advanced promptly while maintaining the integrity and financial stability of the project.

Conclusion

At ASAP Finance, we view progress payments as prudent management, not an administrative step. Each drawdown is carefully assessed to ensure the project remains in a full cost-to-complete position – protecting momentum, minimising risk, and keeping developments moving forward with confidence.