Lending & investment · Defined
Interest reserve
A budgeted amount intended to cover loan interest during a defined period, often while a project is under construction and not generating sufficient income.
Why it matters
Adequacy depends on the draw schedule, interest rate, and duration. Unused construction contingency is not automatically available to replenish an exhausted interest reserve.
In practice
A project example
A six-month completion delay can increase interest needs even when the contractor’s remaining physical scope is unchanged.
Technical references
General educational guidance from KOW Building Consultants. Examples are illustrative, not project records. The applicable contract, standard, program, and jurisdiction control the requirements for a specific assignment.