Glossary
A share of construction payments retained by law.
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Short answer: A statutory holdback is a share of construction payments that owners and contractors must retain under provincial law until lien periods expire. In Ontario, 10% of each payment is held back. The money is earned but not yet available, so contractors must plan cash flow around its delayed release.
Key facts
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A share of construction payments retained by law.
Provincial construction laws require owners and contractors to hold back a percentage of payments until lien periods expire.
It delays cash for contractors.
In Ontario, 10% of each payment is held back.
Applies to Canadian construction.
Reviewers account for holdbacks in construction files.
Holdbacks are earned but not yet available.
Glossary terms are most useful next to the decisions they affect. If you are comparing offers, read the pages on factor rates, payback amounts and the repayment cap together. If you are preparing an application, the documents checklist and requirements pages explain what is read. And if a term in an agreement is unclear, ask the funder to explain it in writing before you sign; a good funder will.
Holdbacks are released after the lien period expires without claims. Tracking release dates and requesting payment promptly can recover a meaningful amount of cash for contractors. Several provinces have modernized their construction legislation with prompt-payment and adjudication rules, so check which regime applies to each project.
Holdbacks appear on progress invoices and payment certificates as an amount retained. In bank statements they show up later, as release payments after the lien period. Tracking them in a separate list makes it easier to chase releases on time.
Most funding terms come back to two questions: how much will I repay in total, and how will each payment affect my cash in a normal month and a slow one. When you meet an unfamiliar term in an offer or agreement, translate it into those two answers before deciding whether it matters. If a funder cannot explain a term in plain language and with your own numbers, treat that as useful information about the offer.
These terms often appear alongside statutory holdback in offers, agreements and conversations with funders:
Reviewed by the Merchant Fund Express team on October 12, 2026. Official pages checked as of that date.
Sometimes; ask.
See the related guides and the comparison pages, or apply and ask.
No. It is educational information, and agreements vary.
Educational information only. It is not legal, tax or accounting advice.
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