Final answer:
Construction loan proceeds can be dispersed through a Draw Schedule, Cost Reimbursement, or Voucher Requisition, each with its own procedure for releasing funds based on project milestones, expense documentation, or approved vouchers respectively.
Step-by-step explanation:
When discussing the dispersal of construction loan proceeds, we are referring to the way in which the funds from a construction loan are distributed to cover the costs associated with a construction project. There are typically three methods of distribution:
- Draw Schedule: The loan proceeds are disbursed in accordance with a predefined schedule that outlines specific milestones in the construction process. When each milestone is reached and verified, a portion of the loan is released to cover the costs incurred up to that point.
- Cost Reimbursement: In this method, the borrower pays out-of-pocket for construction expenses and is then reimbursed by the lender upon submission of expense documentation, such as invoices and receipts.
- Voucher Requisition: This process involves the submission of a requisition form (or voucher) by the borrower for approval by the lender. Funds are released once the lender verifies the legitimacy of the expenses and approves the voucher.
The method chosen typically depends on the terms of the loan, the lender's policies, and the borrower's preference. Understanding these methods is crucial for efficiently managing the financial aspects of a construction project.