There are many unique financial practices that apply to construction, including the concept of retainage. Retainage is a specified amount that is withheld until contracted work is complete. Retainage serves as a protective measure for clients that ensures that contractors meet the agreed-upon terms and complete the project to satisfaction.
While this practice is generally seen as favouring clients, it also ensures contractors don’t have to wait until the end of a project to get any money. However, it also means that contractors only get partial payments and are at the mercy of client satisfaction. In fact, it creates risk and cash flow challenges that can be difficult but necessary to manage.