Guide
Holdbacks protect owners and subcontractors, but they lock up cash a contractor has already earned.
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Short answer: Provincial lien laws require a share of each construction payment, commonly 10%, to be held back until the work is substantially complete and the lien period passes. On a $200,000 contract, $20,000 can be unavailable for weeks or months, so contractors should budget holdbacks as delayed cash and track release dates.
Key facts
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Holdbacks protect owners and subcontractors, but they lock up cash a contractor has already earned.
Under provincial construction and lien legislation, a portion of each payment, commonly 10%, is held back until the work is substantially complete and the lien period passes.
The money is earned but unavailable for weeks or months.
When budgeting a job, treat holdback amounts as delayed cash. A $200,000 contract may leave $20,000 unavailable until well after completion.
Several jobs with holdbacks can tie up a large share of working capital.
Several provinces have introduced prompt payment legislation with timelines for paying invoices on construction projects. Learn the rules that apply where you work.
Following the process, including proper invoices, helps you get paid on time.
Short-term funding can bridge holdbacks and slow progress payments, sized to the gap rather than the contract.
Repaying from holdback releases works when release dates are predictable.
List outstanding holdbacks with expected release dates when applying. A reviewer sees money that is coming, not just a gap in deposits.
It turns a cash problem into a timing explanation.
Keep a simple list of every job with holdback: contract value, holdback percentage, amount held, expected substantial completion date and expected release date. Update it monthly. The total is money you have earned but cannot use, and seeing it in one place helps you plan, chase releases on time and explain your cash position to any lender or funder.
Holdback is earned money you cannot spend yet. Track it job by job, chase releases on time and show the list when you apply.
Keep a simple list: job, amount held back, expected substantial-completion date and expected release date. Review it monthly and chase releases as soon as they are due; release is not always automatic.
Reviewed by the Merchant Fund Express team on October 12, 2026. Official pages checked as of that date.
It is general education. Your file and agreements are specific, so read them and ask questions.
Gather four months of statements and write what the money is for in one sentence.
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Educational information only. It is not legal, tax or accounting advice.
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