Why construction payments are late

What “late” actually looks like

Start with the number that explains why this conversation usually goes nowhere. Subcontractors report waiting an average of 51 days to be paid after submitting a pay application. General contractors estimate that payment is sent in 35. Billd

The rest of the 2026 picture: 64% of subcontractors say they are slow-paid by their general contractor, and 83% of subcontractor owners are worried about cash flow, up from 71% a year earlier. The cost of being on the wrong side of that is not only the wait — 41% of suppliers raise prices, by an average of 9%, on customers who pay late. Billd

Two figures from the 2025 edition make the squeeze concrete, and both are still carried on Billd’s own pages. 75% of subcontractors have supplier terms of 30 days or less — so the supplier’s clock runs out well before the customer’s does. Billd

And when that gap has to be bridged, a good deal of it is bridged personally: 30% of subcontractors tap into personal savings when short on cash. Billd

That is the figure that moves this out of admin and into ownership. An owner funding their customer’s payment terms out of their own savings is not managing a cash-flow wrinkle; they are absorbing a risk the contract quietly handed them, on terms no lender would offer.

The part you do not control

Two mechanisms set the outer limit on how fast money can reach you, and neither is negotiable from your side once the contract is signed.

Retainage

Retainage is money held back from each progress payment until the work is complete, normally 5 to 10 percent. Of the states that cap it, roughly half cap at 5% and the rest at 10%. On federal fixed-price construction work the rule is narrower than it is often described: FAR 52.232-5(e) lets the contracting officer retain a maximum of 10 percent, and only if satisfactory progress has not been made. Federal retainage is a response to a problem, not a default. FAR 52.232-5

The rules move. California now caps retention on most private work at 5%, for contracts entered into on or after 1 January 2026, and the cap applies at every tier — owner to contractor, contractor to subcontractor, and subcontractor to subcontractor. Kilpatrick Townsend

Prompt payment law

Most states have prompt payment statutes setting deadlines for paying contractors and subcontractors, often with interest once the deadline passes. The deadlines, the interest rates, whether public and private work differ, and what counts as a valid reason to withhold all vary by state.

This guide is not going to pretend to cover fifty states accurately, because a guide that gets one of them wrong is worse than one that sends you to check. Look up your own state’s prompt payment statute, and if a payment is genuinely being withheld rather than merely delayed, that is a conversation for a construction attorney rather than a web page.

The part you do control: the pay application

A rejected pay application does not cost you the review time. It costs you the whole billing cycle. Miss the cutoff or get kicked back after it, and the correction is not processed this month; it is processed next month, which on a monthly cycle is thirty days of float you funded yourself.

The scale of it is easy to underestimate. One contractor, describing their process before they changed it, put the rejection rate at a level most people would not accept anywhere else in their business: Siteline

“15% of our pay apps were kicked back for math errors.”

Siteline

That is one company’s experience rather than an industry statistic, and it is worth reading as exactly that. But math errors are the most avoidable item on the list below, and they were costing that contractor roughly one pay application in seven.

These are the reasons pay applications get held or returned. Work down them before you submit, not after you are rejected. Siteline GCPay

1. Are all lien waivers in place, current, and the right type?

   What a good answer sounds like: On many projects payment cannot be released until the correct waiver is on file, so a missing or expired one stops everything. Check the type as well as the date: conditional against unconditional, progress against final. The wrong type is treated the same as no waiver. Which one you should be signing, and the one that ends your lien rights the moment you sign it, is what you’re actually signing on a lien waiver.

2. Does every waiver amount match the pay application?

   What a good answer sounds like: A waiver whose amount does not reconcile to the application it accompanies is a rejection. This catches people when an application is revised after the waivers were collected and nobody regenerates them.

3. Does the math reconcile — line totals, percentages and retainage?

   What a good answer sounds like: Every line adds to the total, the percentages complete match the amounts billed, and retainage is calculated per line at the contracted rate. This is the one that gets caught by a calculator and the one most often typed by hand from a spreadsheet.

4. Is every line within its approved schedule of values?

   What a good answer sounds like: Billed values sit inside the approved SOV line by line. Billing above an approved line — even where the total is right — puts the application back on your desk.

5. Are you billing only against approved change orders?

   What a good answer sounds like: Every change order you are billing has been approved in writing before the application went out. Work performed in good faith on a verbal instruction is still unbillable until the change order exists. What to do when you cannot refuse the instruction — which is most of the time — is change orders when you can’t stop work.

6. Is certified payroll attached, if this is prevailing-wage work?

   What a good answer sounds like: Certified payroll is submitted with the application, for the correct period, for every worker on site. On public work its absence holds payment regardless of whether the work is complete and correct.

7. Are you submitting before the cutoff?

   What a good answer sounds like: The application is in before the GC’s stated cutoff date, with the documents attached rather than following on. Missing the cutoff by a day does not delay you by a day — it moves you into the next cycle, which is usually a month.

None of that requires software. It requires knowing the list and going through it before you submit, every time, which is why it is the first thing to fix and the cheapest.

Retainage in practice

Retainage on a healthy job is money you have earned, sitting on someone else’s balance sheet, for months. At 10% of contract value on a portfolio of work, it is frequently the largest single receivable a subcontractor has and the one they track worst.

Two things are changing. The first is the caps themselves, as California shows. The second is how retainage is released: line-item release, where retainage is freed on completed portions of the work rather than held in full until the whole job closes, is appearing in contracts more often. It is a growing contract term rather than standard practice. Kilpatrick Townsend

The practical problem underneath both is that most teams reconcile retainage by hand in a spreadsheet, separately from the billing system that generated it. That is why retainage balances drift, and why a release negotiated in the contract often is not claimed when it becomes due — nobody was watching the line that became eligible.

Where WorkHoist helps, and where it does not

WorkHoist sells software, so here is the honest split: WorkHoist covers the arithmetic and the records, and does nothing at all about the single most common reason applications get rejected.

What WorkHoist does not do, starting with the big one

WorkHoist also has nothing for certified payroll or prevailing wage. On public work that is a hard gap rather than an inconvenience, and it is the same gap named on our comparison pages.

And WorkHoist does not submit anything to a general contractor’s portal. WorkHoist produces the application; getting it into Textura, GCPay or whatever the GC uses is still your process.

What WorkHoist does do

Retainage is modelled properly rather than bolted on. Retainage percentage is held per line item on an application, with the amount calculated from the billed value rather than typed, and a project-level default so every application starts from the contracted rate. Retainage held is rolled up per project and across the portfolio, and appears in the client portal. WorkHoist speaks British English too, where the same field reads as retention.

On the rest of the checklist: WorkHoist renders G702 and G703 applications from the schedule of values, so line totals, percentages complete and retainage are calculated rather than transcribed — which is the math-error item. Change orders are first-class records with an approval status, so billing against an unapproved change order is visible before it goes out rather than after it comes back. AR aging, budget-against-actual and cash-flow reports are built in, so the cost of the float is something you can see rather than something you feel at the end of the month.

If the questions above are already answered well by whatever you use now, keep using it. The checklist is the valuable part of this page, and it works on paper.

Questions contractors ask

Why was my pay application rejected?

The most common reasons a pay application is rejected are a missing or expired lien waiver, a waiver of the wrong type or an amount that does not match the application, math that does not reconcile across line totals and retainage, billing above the approved schedule of values, billing against change orders that were never approved in writing, missing certified payroll on prevailing-wage work, and submitting after the general contractor’s cutoff. A rejection usually costs a whole billing cycle rather than the review time, because the corrected application is processed in the next cycle.

What is a normal retainage percentage in construction?

Retainage in construction is normally 5 to 10 percent of each progress payment. Among the states that cap retainage by statute, roughly half cap it at 5 percent and the rest at 10 percent. On federal fixed-price construction contracts, FAR 52.232-5(e) allows the contracting officer to retain a maximum of 10 percent, and only where satisfactory progress has not been made, so federal retainage is not automatic.

How long can a general contractor hold retainage?

How long a general contractor can hold retainage depends on the contract and on state law, and there is no single national answer. Retainage is typically released at substantial completion or at final completion and acceptance, subject to any statutory deadline in the state where the work is performed. Some contracts now provide for line-item release, where retainage is freed on completed portions of the work rather than held until the entire job closes, but that is a growing contract term rather than standard practice.

How long does it take to get paid in construction?

Subcontractors report waiting an average of 51 days to be paid after submitting a pay application, according to the 2026 National Subcontractor Market Report, while general contractors in the same research estimate that payment is sent in 35 days — a 16-day gap. Our reading of why the two differ, rather than the report’s: the subcontractor is counting from submission and the general contractor from approval, so the cutoff that was missed and any rejection and resubmission fall inside one number and outside the other.

What documents do I need to submit with a pay application?

A construction pay application normally needs the application form itself, usually AIA G702 with a G703 continuation sheet showing the schedule of values; lien waivers of the correct type and amount from you and, on many projects, from your lower-tier subcontractors and suppliers; certified payroll where the work is prevailing-wage; and documentation for any change orders being billed, which must already be approved in writing. The exact package is set by the contract and by the general contractor, so confirm it before the first application rather than after the first rejection.

Does retainage law vary by state?

Yes. Retainage law varies by state and it changes. States differ on whether retainage is capped at all, at what percentage, whether public and private work are treated differently, and when retainage must be released. California, for example, caps retention on most private work at 5 percent for contracts entered into on or after 1 January 2026, applying at every tier. Check the statute in the state where the work is performed, and take advice on a specific contract rather than relying on a general summary.