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Achievement of milestones
Also called milestone funding, draw schedule, progress funding.
Funding released in stages as defined work is completed and verified, rather than in one lump at closing.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Milestone or draw funding appears wherever the money is meant to build something: construction and tenant improvements, equipment being manufactured to order, multi-site rollouts, and SBA 504 projects with an interim lender. The commitment is for the full amount; the cash arrives in tranches.
Each draw has conditions. Typically a written draw request, evidence of the completed stage (an inspection, a signed AIA-style application for payment, delivery and acceptance certificates for equipment), lien waivers from subcontractors, and confirmation that the remaining budget still covers the remaining work. The lender will usually re-verify title and liens before releasing.
Two costs come with the structure. Retainage means a percentage of each draw is held back until final completion, so your contractor is always financing part of the job. And interest or fees may accrue on funds as they are drawn, or in some equipment structures on progress payments made to a manufacturer before the asset is delivered and the lease term formally begins.
Where a business gets hurt is in the gap between spending and reimbursement. You pay the subcontractor, then request the draw, then wait for inspection and funding. That lag is working capital, and it is why draw-funded projects often sit alongside a line of credit.
Where this one catches people
A draw schedule is not a payment schedule. Nothing obliges the lender to fund a stage it considers incomplete, and inspection standards are the lender's, not yours. A milestone that your customer has signed off on can still fail the lender's test, leaving you out of pocket on work already paid for.
Worked through
A 500,000 build-out funds in four draws of 125,000 with 10 percent retainage. Each draw releases 112,500, so 50,000 accumulates as retainage held until final completion and sign-off. The contractor must carry that 50,000 across the whole job, and usually prices it in.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
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Achievement of milestones — common questions
What does achievement of milestones mean?
Funding released in stages as defined work is completed and verified, rather than in one lump at closing.
Where does achievement of milestones catch people out?
A draw schedule is not a payment schedule. Nothing obliges the lender to fund a stage it considers incomplete, and inspection standards are the lender's, not yours. A milestone that your customer has signed off on can still fail the lender's test, leaving you out of pocket on work already paid for.
Is achievement of milestones the same as an interest rate?
Achievement of milestones is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does achievement of milestones apply to?
Working Capital, Term Loan, SBA Loan, Equipment Financing.
Is there a worked example of achievement of milestones?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside achievement of milestones?
Closing costs, Commitment letter, Conditions precedent, Interim financing, Progress payment.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.