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Disadvantages of Draw Request Disputes

When a contractor becomes approved for a construction loan, that doesn’t necessarily mean that the lender will provide the entire loan at once. As Jacksonville construction attorneys, we know that the process for loan disbursement is very intricate, and typically follows a predetermined schedule that is based off of the contractor’s milestones in the project. Contractors are required to submit what is known as a draw request to the lender for review and approval. This is something that needs to be done every time the contractor needs a progress payment to pay for the different stages of the project. An experienced contractor will know the importance of receiving the finances needed for their project to stay on track and budget. A draw request dispute can halt the time and efficiency of the contractor’s project. In this article we will discuss five potential disadvantages that a draw request dispute with a lender can have on your project.

More Interest Payments

Any delays that are caused by draw request disputes will make the contractor have to pay more interest payments on their loans. That’s more money they will spend while waiting to find a dispute resolution.

More Labor Costs

A lack of financing will stop the contractor from working on their project, which will lead to an expensive loss of labor productivity. If a loss of labor productivity is unexpected, this can cause the contractor’s labor costs to rise significantly.

Time Sensitive

Construction projects are almost always time sensitive. If a contractor is in the middle of a draw request dispute, it will make it all the more difficult to stay on schedule. When the contractor doesn’t have the finances they are expecting when they need them, the project’s timeline will be pushed back.

Remobilization Costs

There will also be unexpected costs in halting construction, in addition to remobilizing once the draw request dispute has been resolved.

Losing the Loan Altogether

Losing the loan and the funding for a construction project is the worst case scenario. No funding equals no more construction, until the contractor can find another lender.

To schedule a consultation with a Jacksonville construction attorney, please call us today at 904.425.5030 or submit our contact request form.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

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