Construction loan draw tracking on the borrower’s side means maintaining the loan’s funded balance, remaining commitment, interest reserve and conditions to funding against the project budget and schedule, so that the developer knows what has been drawn, what can be drawn, what the loan costs each month and when the critical dates fall. Most software in this category is built for lenders and title companies to administer disbursements. This guide is about the developer’s view, which is the one that determines whether the project makes it to conversion or refinancing with the numbers intact.
Lender-side draw software versus borrower-side loan tracking
Built Technologies, Rabbet and similar platforms manage the disbursement workflow: draw requests, inspections, lien waivers, approvals. Developers use them because their lenders require it. They answer “is this draw approved.” They do not answer “what is our balance on the day we actually funded, what is the interest for the period on that balance, how much reserve is left, and when is the completion deadline.” That is the borrower’s loan record, and it usually lives in the development budget spreadsheet next to the hard cost tracker.
What to track
Draws by actual funding date
Interest accrues on the funded balance from the day funds move, under the loan’s daycount and business day conventions. Recording draws on the request date or the month end produces an interest figure that will not reconcile to the lender’s statement. Record the draw on the day it funded.
Floating rate mechanics
Construction loans float over SOFR or another index, with floors, and sometimes with different daycount conventions from the rest of the portfolio. Interest for the period is the funded balance times the rate for that period under that convention. See floating-rate re-amortization and SOFR tracking.
Interest reserve
The loan typically funds its own interest from a reserve line in the budget. The reserve burns faster when rates rise or the schedule slips, and a depleted reserve means equity funds interest. Project the burn monthly against the remaining schedule.
Remaining commitment and budget reallocations
Track the remaining commitment by line item, contingency usage, and reallocations approved by the lender. Balancing requirements (the loan must remain “in balance” with sources covering remaining costs) are tested at each draw.
Critical dates
Completion deadline, outside date for opening, extension options with their tests and notices, conversion or maturity, and the dates on which recourse or completion guaranties burn down. See loan critical date tracking.
Hedge requirements
Many construction loans require a rate cap on the projected funded balance, with replacement requirements at extension. Cap mark-to-market and replacement cost belong in the projection. See hedge requirements.
Recourse and burndown
Completion guaranties, carry guaranties and repayment guaranties reduce on milestones such as certificate of occupancy, stabilized DSCR or a percentage of leasing. Track each guaranty, its trigger and its current exposure. See recourse and guaranty burndown.
Escrows and reserves
Beyond the interest reserve: tax and insurance escrows, operating deficit reserves and leasing reserves that fund at stabilization.
A worked example: the interest reserve that ran out early
A $48 million construction loan for a 190-unit multifamily development, 65% loan-to-cost, 1-month Term SOFR plus 325 with a 0.50% floor, 30-month initial term with two six-month extensions, an interest reserve of $3.1 million in the budget sized at closing on a forward curve, a required cap at 4.50% on the projected funded balance, and a completion guaranty burning down at certificate of occupancy.
Month 6. Funded balance $9 million. Interest reserve draws $52,000 a month. On track.
Month 12. Funded balance $22 million. Term SOFR has risen 90 basis points since closing. Interest is $112,000 a month against a reserve model that assumed $88,000 at this balance. The reserve is projected to run out in month 26 rather than month 30.
Month 18. Schedule slips six weeks. Funded balance $34 million; interest $185,000 a month. The reserve now runs out in month 24. Equity will fund roughly $900,000 of interest before completion. The lender’s balancing test at the next draw requires the shortfall to be covered; the developer funds it into the budget.
Month 27. Certificate of occupancy. The completion guaranty burns down on delivery of the certificate and the lender’s inspection. The developer requests the reduction in writing. The extension test for the first six-month option (debt yield on projected stabilized NOI) is run three months ahead of the notice window.
Illustrative example:
| Month | Funded balance | Monthly interest | Reserve runs out | Event |
|---|---|---|---|---|
| 6 | $9 million | $52,000 | Month 30, on track | None |
| 12 | $22 million | $112,000 against $88,000 in the reserve model | Month 26 | Term SOFR up 90 basis points since closing |
| 18 | $34 million | $185,000 | Month 24 | Six-week schedule slip; equity funds roughly $900,000 of interest; balancing test shortfall funded |
The reserve shortfall was predictable at month 12. A developer tracking draws on actual funding dates with the forward curve saw it then. A developer tracking the budget spreadsheet saw it at month 22.
Common mistakes on construction loans
- Recording draws at month end. Interest accrues from the funding date under actual/360.
- Projecting the interest reserve at the closing rate. Rates move; the reserve is the first casualty.
- Treating the cap as a formality. The notional steps up with the funded balance on some loans, and the requirement follows.
- Requesting the burndown late. The guaranty stays full-size on every guarantor net worth test until the request is made.
- Reconciling the balance for the first time at conversion. Do it monthly; the payoff statement should hold no surprises.
Conversion and refinancing
Construction loans end in a conversion to permanent debt, a refinancing or a sale. Each requires the loan record to be exact: balance, accrued interest, remaining reserves, prepayment terms (often an exit fee or spread maintenance), and the extension tests if more time is needed. A developer who reconciles the balance for the first time at payoff spends the last month of the project arguing about interest.
How this looks in LoanBoss
Construction loans are abstracted with their indices, daycount conventions and business day adjustments. Draws are entered on the day they fund and the funded balance, interest and remaining commitment update from there. Critical date alerts cover completion, extension, conversion and burndown milestones. Hedges are valued with live rates and mark-to-market. Recourse and burndown are tracked per guaranty. Escrows and reserves are tracked with balances and schedules. The loan sits in the same portfolio view as the developer’s permanent and bridge debt, so the maturity schedule and rate exposure include the project.
Frequently Asked Questions
Do we still need the lender’s draw platform?
Yes, if the lender requires it for disbursement. LoanBoss tracks the loan; the lender’s platform processes the request. The two should agree on the funded balance.
How do we handle multiple funding sources?
Senior construction loan, mezzanine and equity each tracked separately with their own terms, rolled up to the project.
What is the most common tracking error?
Interest computed on month-end balances rather than actual funding dates, and interest reserve burn projected at the original rate rather than the current one.
How do extension tests on construction loans differ from bridge loans?
They are similar in structure and often include completion or leasing milestones in addition to financial tests. See bridge and debt fund loans.
When should we request the guaranty burndown?
As soon as the milestone is met, in writing. The guaranty stays full-size on every guarantor net worth test until the request is made, so a completion guaranty that burns down at certificate of occupancy is requested on delivery of the certificate and the lender’s inspection.
Related reading
- Bridge and debt fund loans: extension tests
- Balance sheet and bank loans
- Recourse and guaranty burndown
- Escrows, reserves and repair schedules
- Construction loan and draw schedule in the glossary
- Construction-to-permanent loan in the glossary
Draw software tells the lender what was approved. The developer needs to know what was funded, what it costs and when the deadlines fall. LoanBoss keeps the construction loan in the same portfolio as everything else.
Sources
- Public draw management documentation from Built Technologies, Rabbet and Northspyre (accessed September 2026)
- Mortgage Bankers Association, construction lending practices
- American Institute of Architects, AIA G702/G703 application for payment standards
- LoanBoss construction loan documentation, loanboss.com