Construction Finance
How Do Progress Payments Work?
5 min read- Finance Guide
- Updated 2026
Quick answer
Typical payment stages
5- 6
builder claim stages on most standard construction loans
- Drawdown basis Stage by stage
- Inspection timing Before selected draws
- Interest charged Only on funds used
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1300 421 044
Detailed explanation
A construction loan is usually approved for a total limit, but the lender only advances money progressively as each part of the works is completed. This protects the lender, keeps the builder payment schedule aligned with the contract, and reduces the borrower’s interest cost during the build phase.
Typical progress payment structure
Most standard residential construction loans are released in 5 to 6 stages
- 01Deposit stage
- 02Slab or base stage
- 03Frame stage
- 04Lock up stage
- 05Fit out or fixing stage
- 06Completion stage
At each stage:
Builder submits invoice or claim- Borrower confirms the works claimed
- Lender may order an inspection before payment
- Funds are released directly to the builder
What each payment stage usually means
Standard residential building contracts often follow these milestones:
-
Deposit stage covers the builder deposit required under the contract
-
Slab stage covers site preparation, foundations, plumbing and slab work
-
Frame stage covers wall frames, roof framing and structural shell work
-
Lock up stage generally means external walls, doors and windows are secured
-
Fit out or fixing covers internal linings, cabinetry, plumbing and electrical fit off
How progress payments usually behave
-
Early stages
Smaller draws
-
Middle stages
Larger draws
-
Final payment
After completion
How approval and payment release works
Lenders review
Fixed price building contract and progress payment schedule- Builder details, licence and lender acceptability
- Council approved plans and specifications where required
- As if complete valuation of the finished property
- Borrower servicing and contribution of any required equity first
- Stage invoices, payment authorities and inspection results
- Completion evidence before the final draw
Typical timeframes
-
Initial approval
Often 1 to 3 weeks
-
Progress draw processing
Often 2 to 5 days
-
Construction period
Commonly 4 to 12 months
-
Loan conversion
After final completion
Need Help with your Project?
Common problems
Progress payments can look simple on paper, but delays happen when the claim, inspection or construction contract does not line up with lender requirements.
Stage claim is submitted too early
The builder invoices before the lender is satisfied the relevant stage has actually been completed, causing the payment to pause.
Possible solutions include:
Match claims to the contract stage wording- Arrange inspection promptly
- Use the lender payment authority correctly
- Keep builder and lender updated together
Borrower contribution has not been used first
Many lenders require your own funds or agreed equity contribution to be used before the bank starts making progress payments.
Possible solutions include:
- Confirm contribution order before building starts
- Keep clear evidence of deposit funds paid
- Check whether land equity satisfies part of the contribution
- Avoid assuming the lender pays the first invoice automatically
Final payment is delayed
The final draw can hold up when completion documents, insurance, occupancy evidence or the final inspection are still outstanding.
Possible solutions include:
- Prepare completion documents early
- Check insurer requirements before final stage
- Book final inspection as soon as practical
- Track variations and approvals during the build
Steps to get Finance
Step
01
Obtain a construction loan with an approved build contract and plans.
Step
02
Confirm the progress payment schedule and any funds you must contribute first.
Step
03
Builder reaches a stage and submits an invoice or progress claim.
Step
04
Lender checks the claim and may arrange an inspection or valuation update.
Step
05
Funds are released to the builder for the completed stage only.
Step
06
After the final draw, the loan usually converts to the agreed end loan structure.
Speak with a Property Finance Specialist
Construction finance can look straightforward until a drawdown is delayed, a stage claim is disputed, or lender policy does not match the building contract.
A specialist can help you understand how each payment stage works and which lenders are more likely to suit your project and builder structure.
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