Construction projects carry many risks for everyone involved; the lender, contractor, and the project owner. With good, reliable construction fund control, you can mitigate financial risks throughout the construction process, ensuring a successful, on-budget project.
What is construction funds control?
A construction funds control is a process through which a third party verifies the construction budget, draws documentation, and inspects work progress, helping lenders accurately manage the construction loan draw process. With this service, you don’t have to waste time on on-site inspections and drawing reviews. Below is everything you need to know about construction fund control.
Budget and loan portfolio review
The construction control process begins with a detailed budget and schedule analysis as presented by the borrower. The control experts then coordinate with you and the borrower to review the documents, building plans, and specifications to ascertain that the proposed budget and costs align with the project scope.
With the help of a reliable construction fund control expert like Northwest Construction Control, you get the complete analysis for review, helping you reduce the lender’s risk. Once the analysis is done, all involved parties should know that the construction budget is sound. You also get a detailed look into the borrower’s project portfolio to ascertain that they complete projects on schedule with no cost overruns, helping you assess the risk you would be exposed to should you approve the construction loan.
Draw documentation review
All draw documentation is reviewed through the fund control process to help protect you from surprise construction liens and claims. It is also confirmed that lien waivers and other payment documents have been accounted for, and vendors paid. The fund control also analyzes change orders against the budget to ensure they’re appropriate and no additional unnecessary charges are added. This helps identify budget variances and the prevention of unforeseen funds shortages at the end of the project.
After verifying work in progress, the fund control experts should approve the payment request or immediately suggest changes. The processing and approval of the disbursement requests period differ from one company to another.
Inspection of work in progress
To ascertain that payment requests match work in progress, site visits by qualified inspectors are conducted to determine the completion level. The inspectors then provide you with all the data you need to confirm that budgeted funds are appropriately utilized and payment requests align with work performed. During the site inspection, inspectors may take photos to document the project’s progress at each inspection so you can have a permanent record of the project.
If the inspector identifies any draw issues, they communicate them to the borrower and, at the same time, report back to you and propose appropriate draw adjustments.
How to select a construction funds control company
Since funds control is key to risk mitigation, choosing a reliable and trustworthy company will ensure that the work is effectively and efficiently done. Your ideal construction funds control expert should have an extensive track record of successful projects, and their geographic footprint should be compatible with the project’s location. They should be financially sound, keep up with construction trends, and have in-depth industry knowledge.
Endnote
If you are a construction lender looking for ways to help you lend with confidence, funds control is the way to go. This article will give you the knowledge you need to start with construction fund control.
