Confusion on HML Rehab Funding - What value am I getting?

[Michael Tan]

Hey everyone! So I’m finding myself unable to wrap my head around a certain aspect of Hard Money Lending as I go through my first deal.

I'm currently using an online HML provider, LimaOne, and received "Fix n' Flip" funding for 90% of purchase + rehab costs.

Closing has happened successfully (albeit with a few funding hiccups), and now that I’m heading into the rehabbing stage, I’m utterly perplexed by an aspect of their funding model — specifically, their rehab funding process  

During closing, LimaOne placed the entire rehab budget into an Escrow account and will deliver me the funds on a reimbursement basis. The basic process for reimbursement is:

1) I request a draw for a certain amount and specify which items were completed.

2) LimaOne sends out an inspector to ensure the work was completed.

3) I receive the funds after ~3-4 business days.

The problem with this model is that it doesn’t actually enable me to pay the contractors in a timely manner — the money is essentially inaccessible to me, so the end result is me paying for a high interest loan on funds I can’t functionally use while I fund the rehab out of pocket anyway. And to actually fund the rehab, I’ve had to take out an additional personal loan due to not realizing the funds wouldn’t be available for use up front.

Am I missing something obvious here? What should I have done differently? And for those who have used HMLs, how does the rehab funding process usually work?