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Work Letter Disbursement Gap Calculator

Tenants float build-out cost while waiting for landlord reimbursement.

Total work letter allowance

Monthly tenant burn

Reimbursement lag days

Cost of capital %

Gap financing cost

$7,397

Avg float balance

$250,000

Effective % of allowance

0.01%

How the math works

Float = monthly burn × (lag/30). Gap cost ≈ (avg float × COC × lag/365) + half of allowance × COC × lag/365.

$125k × 2 mo float = $250k × 9% × 60/365 ≈ $3.7k + $500k × 9% × 60/365 × 0.5 = ~$7.4k all-in gap cost.

Editorial noteMaintained by EveryCalc - Reviewed June 2026

EveryCalc calculators are designed for fast, practical estimates with transparent inputs and no required account. We use plain formulas, visible assumptions, and related tools so visitors can check the result from more than one angle.

Results are informational only. For financial, tax, legal, medical, construction, or other high-impact decisions, verify the output against primary sources or a qualified professional.

Learn more about our review process on the EveryCalc methodology page.

How this calculator works

What this page estimates

This Work Letter Disbursement Gap Calculator is built to give a quick, browser-based estimate for work letter disbursement gap. Tenants float build-out cost while waiting for landlord reimbursement. The inputs stay on the page during normal use, and the result should be treated as an estimate for planning, comparison, or education rather than professional advice.

Calculation approach

The calculator applies the standard relationship implied by the inputs, then formats the answer so it can be checked and reused. For finance tools, the most important step is using consistent units, rates, time periods, and assumptions before comparing the result with another calculator or outside quote.

Example workflow

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Practical checks

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How to interpret the work letter disbursement gap result

Best use

Use the result as a planning number for comparing payments, rates, returns, tax reserves, or cash-flow choices before you request a quote or make a commitment.

Cross-check

Compare the answer with the contract, lender estimate, tax form, brokerage statement, payroll record, or invoice that will control the real-world outcome.

Watch for

Do not rely on a single optimistic rate, return, or fee assumption. Money pages work best when you run low, base, and high cases and keep professional advice separate from the estimate.

This page belongs to the Finance calculator library, so the answer should be read in the context of the decision you are modeling rather than as a universal rule.

Before relying on this work letter disbursement gap estimate

Most calculator mistakes come from the inputs, not the arithmetic. Use this short audit before you reuse the answer in a spreadsheet, quote, application, or important conversation.

Confirm source numbers

Match balances, rates, fees, taxes, income, and payment dates against the lender quote, payroll record, tax form, statement, invoice, or contract.

Separate cash flow from total cost

A lower monthly payment can still cost more over time if fees, interest, taxes, or a longer term are hidden in the structure.

Run conservative cases

Test at least one higher-cost or lower-return case before using the output for a purchase, refinance, investment, loan, or tax decision.

Rerun this page when the rate, price, term, fee, tax rule, income, expense, or expected holding period changes.

How to Use

Enter total work letter allowance.
Enter monthly tenant burn rate.
Enter reimbursement lag days.
Enter cost of capital %.
Read financing cost of the gap.

Frequently Asked Questions

What's a work letter?

A work letter (or TI allowance) is landlord's contribution to build out the tenant space, typically $20-150/sqft depending on asset class and market. Tenant spends first, submits invoices with lien waivers, landlord reimburses on a schedule. Lag between spend and reimbursement averages 30-90 days, sometimes 120+. Tenant must float the cost with working capital or construction loan.

Why do landlords lag?

Landlords typically require (1) lien waivers from all subs before release, (2) inspection of completed work, (3) final approval of change orders, (4) receipt of sworn statement. These protections are legitimate but can be slow. Sophisticated tenants negotiate (1) monthly draws on progress, (2) retainage schedule (hold 10% until substantial completion), (3) cure timeline if landlord missed deadline. Institutional tenants demand this; small tenants often don't.

What's the cost of the gap?

Tenant's cost = allowance × (interest rate) × lag time. On a $500k build-out with 60-day lag at 10% cost of capital: $500k × 10% × (60/365) = $8,219 effective financing cost. Plus hidden cost: construction loan origination fees, personal guarantees, admin friction. Total all-in cost of the gap often runs 2-4% of the allowance. Factor into rent negotiations.

How do sophisticated tenants minimize this?

Landlord-direct contracting (landlord hires GC, pays GC directly, no tenant float). Monthly progress draws with 10 business-day turnaround requirement. Dispute resolution timeline in writing (AAA arbitration not lawsuit). Interest-bearing escrow for retainage. Accepting allowance as rent abatement instead of cash (no lag, no friction). Large tenants use these; mid-market often doesn't ask.