The lenders can either choose to disperse up front or through a fund control mechanism wherein the costs are doled out in segments. Considering this is only $90k I would think some lenders would just fund up front, and others might break it down into 2 draws; one at the 50% mark and the other upon final completion.
If it’s fund-controlled what usually happens is the contractor fronts the money for materials and completes portions of the work. When one of those portions is complete the contractor calls the lender for a draw payment. The lender sends out the original appraiser or a construction estimator to inspect the project and verify that the portion of the contract being paid for is complete; when the lender receives that draw inspection report they fund the draw.
A few lenders do so many construction loans they employ a construction estimator or contractor on staff to conduct those inspections – one of my clients has a guy like this on staff. Other lenders subcontract those inspections out to either the original appraiser or contractor.
With that said, there might be a few lenders that would just disperse the money and hope the project would be completed. That’s pretty risky because some of these contractors have been known to quit, go broke or just skip out on the work after receiving payment. The federal banking regulators wouldn’t put up with more than a couple losses arising from such decisions.
