How to get GC started without $ from 203k loan

[Gene Knighton]

My wife and I are in the process of closing on an investment property. We have a 203k loan that allows us to use part of the loan for renovations. However, the loan will not pay the contractor upfront of anything until the consultant approves for a draw after work has begun and monies are based on progress.

How are we suppose to get started? What about the materials the contractor will need to get started? Do we have to come out of our pockets to get started? If so, can we get reimbursed from the loan?

Is there a way to work this out where the GC can get started and the loan officer release monies sooner?

Thanks

[Jeffrey Stasz]

@Gene Knighton this is a tough one and you may owe the contractor some money to cancel the contract. I am a builder and have built on similar rehab products. Typically the bank expects the contractor to bridge the financing. As a result many builders (myself included) increase our costs for these types of projects because we are also being asked to provide high risk mezzanine financing. 

Sometimes you can get around this problem by writing a contract that has a significant deposit or profit payment built in to the execution of the contract. I typically do both. I will ask for a chunk of my profit due upon execution of the contract and then charge the going rate for mezzanine financing in my area.