Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Lender's Disbursement Form

In order to obtain a disbursement from the construction loan, lenders typically require the borrower to complete a loan disbursement form. The form reflects the line items of the approved construction loan and shows what monies have been disbursed and what still remains to be disbursed. Exhibit 9.3 is an example of a loan disbursement form with numbers filled in for the hypothetical example in this chapter. The key is that the construction loan funds are allocated into categories and if you exhaust that category you must tap the contingency line item, if available. The goal is to, as best as possible, anticipate the possible categories and develop a strong working relationship with your construction loan administrator so that, if necessary, you can shift funds from one category that has not been significantly tapped into a category that requires funding.

It is also important to understand the lender's disbursement process. Often, the lender will require a site inspection prior to disbursement of funds. The inspection, if required, could easily add two weeks to the disbursement time frame. In addition, lenders typically will require, prior to disbursement, a conditional lien release from the general contractor. The lien release is issued conditional on receiving valid funds in payment of the submitted invoice.