Construction lenders monitor project progress by gaining real-time visibility into key milestones, budgets, and timelines through specialized software. Platforms like Sekady allow lenders to track contractor updates, review progress reports, view financial disbursements, and monitor compliance—all in one system. This ensures projects stay on schedule and within budget, reducing risk and increasing transparency.
Project Progress Monitoring: The Lender's Early Warning System
Construction lending is fundamentally about risk management. The biggest risks emerge when projects deviate from plan: over-budget, behind schedule, quality issues, contractor problems.
The best lenders catch these deviations early. The way they do it is through rigorous project progress monitoring.
Why Lenders Must Monitor Project Progress
Construction is unpredictable. Weather delays. Material shortages. Labor issues. Design changes. Value engineering. Budget overruns sneak up quietly.
A project can look fine one month and be in crisis the next month if you're not watching carefully.
Lenders who monitor rigorously spot problems early and can intervene before they become catastrophic.
What Lenders Actually Monitor
1. Schedule Performance
"Is the project on track to complete on time?"
Metrics to track:
- Planned completion vs. actual timeline
- Each major milestone (foundation, framing, roofing, etc.)
- Days ahead or behind schedule
- Trend (getting better or worse?)
Why it matters:
- Delays often signal other problems (labor issues, design problems, budget issues)
- Schedule delays reduce cash flow for contractor (bad)
- Delays may trigger penalty clauses
- Behind-schedule projects run higher risk of default
How to monitor:
- Monthly progress reports from contractor
- Visual site inspections
- Comparison to baseline schedule
- Tracking of critical path items
2. Budget Adherence
"Is the project staying within budget?"
Metrics to track:
- Budget per line item (foundation, framing, MEP, etc.)
- Actual spend vs. budgeted amount for each line item
- Variance (% over or under budget)
- Trend (getting worse?)
- Remaining contingency
Why it matters:
- Budget overruns are the #1 cause of construction loan problems
- Overruns deplete contingency reserves
- Large overruns may result in lender not funding final draws
- Over-budget projects often correlate with other problems
How to monitor:
- Draw requests show actual spend vs. budget
- Line-item tracking throughout project
- Regular lender review
- Alert system when variance exceeds threshold
3. Draw Request Patterns
"Does the draw request pattern match the schedule and budget?"
Metrics to track:
- Timing of draws (are they coming when expected?)
- Size of draws (are they the expected amounts?)
- Documentation quality (are submissions complete?)
- Approval time (are we approving faster or slower?)
Why it matters:
- Unusual draw patterns may signal problems
- Too-frequent draws may indicate cash flow issues
- Under-sized draws may indicate contractor problems
- Poor documentation quality signals management issues
How to monitor:
- Dashboard showing all draws and their timing
- Alerts when draws deviate from plan
- Tracking draw approval time trends
4. Contractor and Subcontractor Performance
"Are the contractor and subs performing well?"
Metrics to track:
- Payment history (do subs get paid on time?)
- Work quality (are inspections revealing issues?)
- Communication (responsive to lender inquiries?)
- Bonding and insurance (maintained throughout project?)
- Safety record (any incidents?)
Why it matters:
- Poor contractor performance predicts project problems
- Sub payment issues indicate contractor cash flow problems
- Quality issues delay project and increase costs
- Unresponsive contractors are a red flag
- Insurance lapses create exposure
How to monitor:
- Inspection reports note quality issues
- Lien waiver collection shows sub payment history
- Insurance tracking system
- Bonding documentation verification
- Regular contractor communication
5. Loan Covenant Compliance
"Is the borrower meeting all loan agreement requirements?"
Common covenants:
- Budget remains "in balance" (draws don't exceed approved budget)
- Loan-to-value stays above minimum (property value stays strong)
- Insurance is maintained (property is insured)
- Lien waivers are collected (no secret liens)
- No unauthorized changes (change orders follow protocol)
- Permits and inspections maintained (work is legal)
Why it matters:
- Covenant breaches give lender enforcement rights
- Breaches often signal underlying project problems
- Early detection allows remediation
- Prevents defaults
How to monitor:
- Automated covenant monitoring in loan system
- Alerts when covenants are breached
- Remediation tracking
6. Inspection Results
"What do third-party inspections tell us about project quality?"
Inspection metrics:
- % of work verified complete (vs. contractor's claim)
- Quality issues identified
- Discrepancies between claim and inspection
- Trend (more or fewer issues over time?)
Why it matters:
- Inspections are objective verification of progress
- Quality issues may delay project or require rework
- Contractor claims vs. inspection verification show contractor integrity
How to monitor:
- Every draw is inspected
- Inspection reports reviewed for trends
- Quality issues logged and tracked
- Contractor notified of issues
How Sekady Enables Project Progress Monitoring
Sekady consolidates all project progress data in one dashboard:
Real-Time Progress Dashboard:
- Schedule status (on track / at risk / behind)
- Budget status (under / on / over budget)
- Draw history (all draws with approval dates)
- Inspection results (latest inspection findings)
- Compliance status (covenants being met)
- Risk indicators (budget variance, schedule delays, quality issues)
Automated Alerts:
- Alert if project falls behind schedule
- Alert if budget line item is approaching limit
- Alert if draw request is late
- Alert if inspection reveals quality issues
- Alert if covenant is breached
Progress Reporting:
- Monthly project status reports (auto-generated)
- Dashboard exportable to PDF for stakeholders
- Trend analysis (is project improving or deteriorating?)
- Forecast (when will project complete? What will final cost be?)
Inspection Integration:
- All inspection reports in one place
- Photo documentation of all phases
- Comparison of contractor claims vs. inspection findings
- Quality issue tracking
Covenant Monitoring:
- Automated tracking of key covenants
- Real-time alerts when breached
- Documentation of compliance status
- Remediation tracking
What Good Project Progress Monitoring Looks Like
Daily/Weekly Level:
- Dashboard showing current status of all projects
- Alerts for any red flags
- Quick identification of anything requiring immediate attention
Monthly Level:
- Detailed project status reports
- Analysis of budget and schedule trends
- Covenant compliance review
- Discussion with borrower about any issues
- Lender takes corrective action if needed
Quarterly Level:
- Executive review of portfolio progress
- Analysis of project success rate
- Identification of systemic issues
- Strategic decisions about portfolio
Red Flags That Require Action
Red Flag 1: Project behind schedule
- Review reason for delay
- Assess impact on budget and timeline
- Discuss with contractor recovery plan
- Monitor closely for further delays
Red Flag 2: Budget variance exceeds threshold
- Review which line items are over-budget
- Understand reasons for variance
- Assess whether remaining budget is sufficient
- May require change order or contingency use
Red Flag 3: Inspection reveals quality issues
- Require contractor to remediate
- May withhold portion of draw until fixed
- May require re-inspection
- Document issue and resolution
Red Flag 4: Contractor cash flow issues
- Indicated by delayed sub payments
- Indicates contractor is struggling
- Requires lender intervention
- May need to fund draws more conservatively
Red Flag 5: Repeated inspection discrepancies
- If contractor frequently over-claims completion, there's integrity issue
- May indicate fraud or incompetence
- Requires lender escalation
- Monitor draws more conservatively
Red Flag 6: Covenant breach
- Requires immediate attention
- Lender has enforcement rights
- Work to remediate immediately
- Document for compliance
Best Practices for Project Monitoring
1. Define your monitoring metrics upfront
- What are the key metrics you'll track?
- What are the thresholds for alerts?
- Who needs to be notified?
2. Monitor consistently
- Review project status weekly or monthly
- Don't wait for quarterly reviews to catch issues
- Early detection enables early intervention
3. Use automation where possible
- Automated alerts catch issues immediately
- Dashboards provide instant visibility
- Don't rely on manual tracking
4. Communicate with borrower regularly
- Monthly project status calls
- Share dashboard insights
- Address issues collaboratively
- Build relationship of transparency
5. Document everything
- Inspection reports in system
- Covenant compliance status documented
- Any discussions with borrower recorded
- Maintains audit trail
6. Escalate when needed
- If issues aren't resolved at project manager level, escalate
- Keep management informed of portfolio risk
- Take corrective action quickly
7. Learn from projects
- Track which projects succeeded and why
- Track which had problems and what caused them
- Use data to improve your process
Technology That Enables Monitoring
Manual Approach (outdated):
- Email from contractor with update
- Someone reads email
- Someone manually enters into spreadsheet
- Dashboard not available
- Red flags not caught until someone thinks to look
- Monitoring is inconsistent and reactive
Modern Approach (Sekady and similar platforms):
- Contractor updates project status in system
- Data automatically flows to dashboard
- Alerts triggered automatically
- Lender sees alerts immediately
- Monitoring is continuous and proactive
- Issues caught instantly
The ROI of Rigorous Monitoring
Scenario: Lender with 30 active projects
With poor monitoring:
- 2-3 projects per year encounter major problems (over-budget, delayed, etc.)
- Each problem project costs $50,000-$200,000 in loss or recovery effort
- Annual problem cost: $100,000-$600,000
With rigorous monitoring:
- Early detection reduces problems to 0.5 projects per year
- Early intervention prevents most losses
- Annual problem cost: $25,000-$50,000
Savings: $75,000-$550,000 per year
Plus: Better borrower relationships, faster project completions, more repeat business, better reputation.
Conclusion: Project Monitoring is Risk Management
Construction lending risk is managed through rigorous project monitoring. Projects that start out fine can encounter problems. The lenders who catch those problems early can intervene before they become catastrophic.
Sekady's real-time monitoring, automated alerts, and comprehensive dashboards enable lenders to catch issues early and maintain control of their portfolio.
Ready to improve your project monitoring? Learn how Sekady provides real-time visibility into your projects by visiting our FAQ page or scheduling a demo.
