A developer is building a 10-unit commercial plaza in Ottawa with a total build cost of $3,000,000. The construction loan is approved for $2,100,000 (70% of cost). The lender requires a holdback of 10% on each draw, and the initial draw request for foundations and site preparation is $400,000. How much will the developer receive in the first draw?

Question: A developer is building a 10-unit commercial plaza in Ottawa with a total build cost of $3,000,000. The construction loan is approved for $2,100,000 (70% of cost). The lender requires a holdback of 10% on each draw, and the initial draw request for foundations and site preparation is $400,000. How much will the developer receive in the first draw?

Answer options: ✅ $360,000, reflecting the 10% holdback on the draw request.

• $400,000, as the holdback only applies to the final draw.
• $210,000, as it's 10% of the total loan amount disbursed partially.
• $270,000, calculated as 10% less the 10% holdback on the portion.

Correct answer: $360,000, reflecting the 10% holdback on the draw request.

Explanation: Lenders typically apply a 10% holdback (lien holdback as per construction lien act requirements) on each draw request to ensure work completion and protection against liens. Thus, a $400,000 draw request would result in $400,000 * (1 - 0.10) = $360,000 disbursed.