The MOST common method of distributing funds provided by a construction loan is a:
A)Single lump sum of money at the closing of the loan
B)Single lump sum of money at the end of the construction project to reimburse the developer for the project's expenses and profit
C)Series of payments throughout the construction project to reimburse the developer for costs incurred since the previous payment
D)Series of payments throughout the construction project to reimburse the developer for anticipated expenses in the upcoming period

Question

Quizplus · Accepted Answer

The most common method of distributing funds provided by a construction loan is a series of payments throughout the construction project to reimburse the developer for costs incurred since the previous payment. This is known as a draw schedule and usually requires an inspection by a lender representative to ensure the work has been completed before releasing the funds. This allows the lender to mitigate risk by only providing funds for work that has already been completed.

The MOST Common Method of Distributing Funds Provided by a Construction