The first draw is when your money starts going out. Before it, a bad contractor costs you time. After it, they cost you cash, weeks of schedule and maybe a clean title.
Your lender underwrites the deal. You underwrite the contractor. Here are the five documents to collect before draw one, and what to check on each.
Why the First Draw Is the Line
Most rehab and construction loans pay the budget in arrears. The work gets done, an inspector confirms it, and the draw is released. That setup protects the lender's collateral.
It does not stop a general contractor from taking your deposit and disappearing. It does not stop an unpaid plumber from filing a lien against your property either. The documents below close those gaps. For how draws usually move on a loan, see our rehab draw schedule guide.
1. The License: Look It Up Yourself
Never accept a photo of a license card. Look it up on the state board's website.
In Florida, the only official place to check is the DBPR Licensee Search portal at myfloridalicense.com, according to LegalClarity, published May 20, 2026. The same LegalClarity guide warns that a contract with an unlicensed contractor may be unenforceable under Florida law. So if the job goes wrong, you may have no contract to sue on.
The threshold is low. Florida requires an active DBPR license for work above a $500 handyman threshold, according to Revolution Florida's DBPR verification guide, published September 2026. California draws the same $500 line for construction work, according to Boyes Legal, published November 19, 2025.
Check four things on the lookup:
- Name match. The company on the license is the company on your contract and on every invoice.
- Classification. A roofing license does not cover a gut rehab. The license type has to match the scope.
- Status. Active. Not expired, suspended or lapsed.
- Discipline. Most state portals show complaints and past actions.
Also make sure the licensed contractor is the one pulling the permit. A permit in someone else's name is a red flag.
2. The Insurance Certificate: Read the Fine Print
Every contractor hands over an ACORD 25. Most investors file it without reading it. That is a mistake.
According to Docutrax, published August 11, 2026, the ACORD 25 carries a standard disclaimer saying it is issued "as a matter of information only" and gives the certificate holder no rights. Being named as certificate holder gives you no coverage, and additional insured status needs a separate endorsement on the policy, according to illumend, published April 14, 2026.
So ask for the endorsement itself. Ellie Insurance, in a guide published July 1, 2026, names the forms to request: CG 20 10 or CG 20 37 for additional insured, and CG 24 04 for a waiver of subrogation.
Three more checks:
- Right form. A separate Docutrax guide, published July 14, 2026, notes that the ACORD 25 covers liability only, while property coverage goes on the ACORD 27 or ACORD 28.
- Workers' comp. If the contractor has employees on site, the certificate should show it. If they claim an exemption, get the exemption paperwork.
- Dates. Illumend's April 14, 2026 guide points out that a certificate only shows coverage at the moment it was issued, and a policy can lapse before work starts. Get the certificate straight from the contractor's insurance agent, and ask for a new one before large draws.
Your own policy still matters. The contractor's liability cover does not replace builder's risk or vacant-property cover. See builder's risk vs vacant dwelling and investment property insurance requirements.
3. References: Call the Right Three People
A reference list is marketing until you check it.
Ask for three jobs finished in the last 12 to 18 months with a similar scope and budget. Then call:
- The investor or owner. Did the job finish on budget? How many change orders were there? Would they hire the contractor again?
- A supplier. Does the contractor pay on time? If the lumber yard makes them pay cash on delivery, take note.
- The building department. Did inspections pass the first time?
Drive past at least one finished job. Then search the county recorder for liens filed at the contractor's past job addresses. Subs who filed liens on the last client's property will likely do the same on yours.
4. The Payment Schedule: Match It to the Draw Schedule
The payment schedule in the contract should line up with your lender's draw schedule. If it doesn't, you cover the gap with your own cash.
Watch the deposit. A contractor who wants 30% up front on an $80,000 scope is asking for $24,000 before an inspector has seen any work. Your draw won't cover that.
Some states cap deposits by law. A California Contractors State License Board industry bulletin, published November 22, 2022, says residential remodel contracts under the state's home improvement rules allow a down payment of no more than $1,000 or 10% of the contract price, whichever is less, and that later payments cannot exceed the value of the work and materials already delivered. Whether a rule like this covers your job depends on the state, the property and the contract. Have counsel review it.
A clean schedule ties every payment to a milestone an inspector can see:
| Milestone | Payment | Share |
|---|---|---|
| Demo and rough framing complete | $20,000 | 25% |
| Mechanical rough-ins pass inspection | $20,000 | 25% |
| Drywall, cabinets and flooring installed | $24,000 | 30% |
| Final inspection and punch list | $16,000 | 20% |
Illustrative only, on an $80,000 rehab budget.
Hold back the last payment until the punch list is done and every final waiver is in hand.
5. The Lien Waiver Process: Agree on It Before the First Check
A lien waiver is a signed release of lien rights in exchange for payment. It comes from the contractor, a sub or a supplier. There are four types: conditional or unconditional, and progress or final. A conditional waiver only takes effect once the payment clears. An unconditional waiver takes effect when it is signed.
The required form depends on the state, and sources don't agree on the count. Levelset, updated January 15, 2026, says 12 states set out required lien waiver forms by statute. Corpay, updated June 11, 2026, lists eight statutory-form states. Either way, the form matters. In Texas, a waiver that does not substantially follow the statutory forms is void, according to LienDone, published May 6, 2026. Use the state's own form, not a generic template.
Florida adds its own rules. Under section 713.06 of the 2025 Florida Statutes, published by the Florida Senate, a lienor who is not in direct contract with the owner must serve a notice to owner no later than 45 days after starting work. The same section lets the owner require a sworn contractor's affidavit on any payment.
Build this workflow into the contract:
- With each draw request, the contractor delivers a conditional progress waiver for the amount requested.
- Subs and major suppliers deliver their own conditional waivers for their share.
- With the next draw request, the contractor delivers unconditional waivers for the previous draw, which proves those funds cleared.
- At the end, collect final unconditional waivers from the contractor and every sub before the last payment goes out.
No waiver, no payment. Put that sentence in the contract.
How This Fits Your Loan
Draws stall when the work, the budget and the paperwork don't match. Clean contractor files keep them moving. For the other common holdups, read what stalls a deal after the term sheet.
Funded Capital's published terms, as of September 23, 2026:
- Fix & Flip from 8.75%. DSCR from 6.75%. These are starting points in a range, not guarantees.
- Ground-up construction: 85% of full cost as standard, where full cost is purchase price plus sunk costs plus the remaining budget. Builders with 20 or more completed ground-up builds get 90%. On top of either, a further 5% of cost can finance the interest reserve, so an experienced builder reaches 95% all-in. That reserve money never pays for construction. After-repair loan-to-value is a second cap, and the lower of the two applies.
- Credit: the minimum score is 660, and the best tiers need 680+.
- Coverage: 45 states. Excluded: VT, UT, OR, SD, ND.
- Closing: 5-10 business days, depending on the deal.
See the fix and flip program, the new construction program, or run your numbers in the calculator.
The One-Page Checklist
| Document | What to verify | Red flag |
|---|---|---|
| License | Name, classification, status, discipline on the state portal | Photo of a card only, or a permit in another name |
| Insurance | Additional insured endorsement, workers' comp, current dates | Certificate holder only, no endorsement |
| References | Three recent jobs, a supplier, the building department | Only friends or family, no addresses |
| Payment schedule | Milestones that match your draws, a small deposit | Large deposit before any inspected work |
| Lien waivers | Conditional with each draw, unconditional for the last one, state form | Generic template in a statutory-form state |
Apply Now
Your contractor file is ready. Now get the capital lined up. Apply now or call (305) 857-5620.
Terms are subject to underwriting, appraisal, title, and insurance.
Common questions
What documents should I get from a contractor before the first draw?
Is a certificate of insurance enough to protect me?
What is the difference between a conditional and an unconditional lien waiver?
How much deposit should a contractor get up front?
Does my lender vet my contractor for me?
Written by
Luis Fajardo
Senior Sales Director, Funded Capital · Lends to real estate investors in 45 states. $500M+ funded across 1,200+ deals.