What a lender should check before releasing a construction payment

Every drawdown request comes with a payment application and a progress report from the borrower. Before the bank releases the money, an independent monitor answers one question: is the money left enough to finish the project? These are the six checks behind that answer.

1. Is the work really there?

Visit the site and compare what is built with what is claimed. Check measured quantities against the bill of quantities and the drawings, and photograph the evidence. Materials on site should only be paid for if they are protected, stored and owned by the project.

2. Does the budget still hold?

Compare the anticipated final cost with the approved budget. Add pending variations and claims, not only approved ones. Then run the funding test: the remaining loan plus the remaining equity must cover the cost to complete.

3. Is the programme realistic?

Compare actual progress with the baseline programme. A slipping completion date means more interest, possible covenant breaches and income that starts later. If the critical path is late, ask for the contractor's recovery plan.

4. Are the contract terms respected?

Check that retention is being held, advance payments are being recovered and certified amounts follow the contract. Under FIDIC, the Engineer's payment certificate should match the amount requested.

5. Are permits, insurance and safety in order?

The building permit and its conditions must cover what is being built, insurance must be in force, and there should be no suspension orders or serious safety breaches.

6. Did earlier payments reach the right people?

Ask for evidence that previous drawdowns paid the contractor, and that the contractor is paying its subcontractors and suppliers. Unpaid suppliers are an early warning of trouble.

For banks and funds, we provide independent cost and progress monitoring on projects across Albania, reported monthly in English.