The 5 Biggest Risks of Draw Inspections and How to Mitigate Them

Draw inspections are a crucial component in the construction lending process, but they come with inherent risks that can have significant repercussions if not properly managed.

Here are the five biggest risks associated with draw inspections, along with strategies to mitigate them:

1. Inaccurate Reporting
2. Delayed Inspections
3. Fraudulent Activities
4. Data Breach & Security
5. Non-Compliance
& Regulations
1. Inaccurate Reporting
1. Inaccurate Reporting
2. Delayed Inspections
3. Fraudulent Activities
4. Data Breach & Security
5. Non-Compliance
& Regulations

Risk: The biggest risk of a draw inspection is misjudging the project’s progress. Since the lender typically disburses funds based on the reporting, any over-reporting of progress puts the lender’s capital at unnecessary risk. Under-reporting can delay the funding needed to keep the project on track, within agreed timelines, therefore impacting reputational risk of the lender.

Solution: RAZE networks with only qualified independent contractors (Inspectors), with in-the-field construction knowledge, trained to spot the nuances of a construction project. Each inspector is licensed to use the state-of-the-art Boots USA platform, supporting real-time data collection and built-in safeguards to ensure accurate reporting.

Risk: Delayed draw inspections are a bottle neck of the entire project that result in delayed disbursements, potentially slowing down construction, which increasing carrying costs and may create project overruns.

Solution: The RAZE network was established in part to address this concern, by leveraging a pool of inspectors capable of covering inspections during peak demand, across the United States. Automation creates efficiencies since each inspector is trained and licensed to use the BOOTS USA app.

Risk: The risk of fraud in draw inspections includes the potential for collusion between inspectors and contractors, as well as the fabrication of progress reports.

Solution: The BOOTS USA mobile app utilizes a first-come, first serve concept at the core. Each inspection request is publicized via the On-Demand Marketplace to the credentialed inspector marketplace. In addition, the lender can adjust settings to the number of sequential inspections any inspector profile can complete.

Risk: Draw inspections manage sensitive information during their lifecycle and any data breach could cause financial loss and reputational damage for the lender.

Solution: RAZE’s partnership with CodeFi ensures all inspectors utilize state-of-the-art cybersecurity measures, including data encryption, secure data storage, and regular security audits, with the software involved in the inspection process.

Risk: Failure to comply with federal, state, and local regulations can result in legal penalties, project delays, and financial losses.

Solution: The BOOTS USA platform is designed to comply with current regulations and is consistently updated to meet emerging legislation.

Understanding these risks and implementing strategic measures to mitigate them provide a strategic advantage to our clients, the lenders, and their construction managers to secure their investments and ensure that the draw inspection process facilitates success.