Final answer:
The method of disbursement typically used in construction lending is called progress payments. These payments are based on the completion of specific milestones or percentage of work completed.
Step-by-step explanation:
The method of disbursement typically used in construction lending is called progress payments. In progress payments, the lender releases funds to the borrower at various stages of the construction project. These payments are based on the completion of specific milestones or percentage of work completed.
For example, if a construction project is divided into five stages, the lender may disburse funds after the completion of each stage. This ensures that the borrower has the necessary funds to continue the construction process and minimizes the risk for the lender.
Progress payments are a common practice in construction lending as they help manage the cash flow of the project and provide the necessary funding at various stages.