The share of each construction payment that is held back until the job is finished and the liens are cleared.
The word covers two layers. Under the construction contract, the owner holds back part of each payment to the contractor. Under the loan, the bank holds back part of each draw to the borrower.
On the loan side, the OCC handbook says that under a progress payment plan the bank normally retains, or holds back, 10 to 20 percent of each payment to cover cost overruns or unpaid bills from suppliers and subcontractors. The final draw usually pays out the holdback, after the bank confirms lien waivers or releases, reviews the final inspection report and sees the certificate of occupancy.
On federal construction contracts the rule is narrower. Retainage is used only when progress has not been satisfactory, and it may not exceed 10 percent.
Example: with a 10 percent holdback, a $400,000 draw request funds $360,000. The other $40,000 waits for the final draw, so someone has to carry it until then.
How it shows up in the data here
Retainage sits inside a single loan or contract, and no public file reports it. Bank call reports show only the construction and land balance held on the report date. To find lenders that carry construction loans, start at construction lenders or filter construction in search. The holdback percentage a given bank uses is not in any data here; it is set in the loan agreement.
Go further
- Construction lenders by state: Lenders with construction balances, state by state.
- Deal summary builder: Turn the facts of a deal into a clean one-page summary you can copy or print. Nothing is saved or sent.
- Construction loan package checklist: A construction lender is lending against a building that does not exist yet. The package has to show what it will cost, who will build it, where every dollar comes from, and how the loan gets repaid when it is done.
Related terms
- Construction draw: One advance of construction loan money, released after the lender confirms that the work it pays for is in place.
- Cost overrun: The amount by which a construction project costs more than its budget, which the borrower is normally expected to cover.
- Payment and performance bond: Two surety bonds on a construction contract: one backs payment of subcontractors and suppliers, the other backs completion of the work.
- Construction loan: A short-term loan that pays for building or renovating a property, advanced in stages as work is finished and repaid from a sale or a permanent loan.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.