Retainage
A portion of contract payment held until work is complete or accepted.
Why it matters
Retainage reduces the portion of a construction invoice that is immediately collectible, which directly affects how much a factor will advance against it. A 100,000 invoice with 10 percent retainage has only 90,000 collectible when submitted; the remaining 10,000 is withheld until project completion and acceptance. Factors typically require the seller to disclose retainage amounts and may only advance against the non-retained portion. Some programs specifically exclude retainage from the eligible receivable calculation, treating the retained amount as a separate obligation outside the factoring facility.
How it appears in contracts
Factoring agreements for construction work include specific provisions for retainage in the Eligible Receivables definition. The definition may exclude retainage entirely or may permit funding of the non-retained portion with a separate retainage schedule. When retainage is released at project completion, the timing may fall outside the normal recourse period, requiring additional contractual clarity on how the retainage balance is handled when it finally becomes payable. Some agreements permit the factor to hold retainage releases in reserve until all other project invoices from the same customer are fully collected and all fees settled.
Related terms
Related reading
Sources
- Uniform Commercial Code Article 9 - Uniform Law Commission. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.