Your Guide to Australian Construction Loan Cash Flow

Construction loans in Australia offer a financing solution for building your dream home or investment property. But unlike traditional mortgages where you receive a lump sum, construction loans function through a process called progressive drawdown. This directly impacts your cash flow throughout the building phase, so understanding how it works is crucial.

What is Progressive Drawdown?

Progressive drawdown simply means you access the loan funds in stages, not all at once. The lender releases funds based on the completion of specific milestones in the construction process. This protects the lender’s interest by ensuring the funds are used as intended and that the project stays on track.

How Does the Drawdown Process Work?

The specifics of the drawdown process can vary slightly between lenders, but the general framework remains consistent:

  1. Pre-determined Stages: Before construction begins, you’ll work with your builder and lender to establish a drawdown schedule. This schedule outlines the various stages of construction, typically including:
    • Site clearing and excavation
    • Foundations
    • Frame construction
    • Roof installation
    • Lock-up stage (external walls, windows, and doors complete)
    • Internal fixtures and fittings
    • Completion
  2. Milestone Verification: Once a stage is complete, your builder will typically submit an invoice and a progress report to your lender. The lender may also send a valuer to the site to verify that the work is completed to the required standard.
  3. Drawdown Approval: Upon verifying the progress report and valuation, the lender will release the funds for that specific stage according to the pre-determined schedule. These funds are then paid directly to your builder.

What Triggers the Release of Funds?

The release of funds is solely triggered by the completion and verification of each construction stage. This system ensures both transparency and financial security. You won’t have access to funds for the next stage until the current stage is demonstrably finished.

How Much Money is Released at Each Stage?

The amount of money released at each stage is also typically pre-determined in the drawdown schedule. A common structure involves a smaller initial drawdown (around 10%) for site works and foundations, with progressively larger amounts released as the construction progresses and the value of the property increases.

Benefits of the Drawdown Process

  • Protects Your Investment: The lender ensures the funds are used for the intended purpose, reducing the risk of misuse and project delays.
  • Manages Cash Flow: Predictable drawdowns help you manage your finances throughout the construction phase.


  • It’s crucial to discuss the drawdown schedule in detail with your builder and lender before construction commences.
  • Ensure you have a buffer in your budget for unexpected costs that may arise during the build.

By understanding the drawdown process, you can make informed financial decisions and ensure a smoother construction journey for your Australian property project.