Construction Payment Terms Explained

Net-30, net-60, net-90

Net-30 means payment is due 30 days from the invoice date. Net-60 and net-90 extend the wait to 60 or 90 days. These terms are standard in commercial and government construction. A $100,000 invoice on net-60 creates a 60-day gap; on net-90, 90 days. The difference is significant for cash flow. For more on invoice timing, see construction invoice payment delays and contractor waiting on invoices.

Draws and progress billing

Draws are milestone-based payments. Contractors complete work, submit a payment application, and wait for approval and payment. The process can take 30–45 days or more. Progress billing ties payment to the same milestones. For the full timing impact, see contractor draw schedule cash flow and contractor progress billing cash flow.

Retainage

Retainage is a portion of payment (often 5–10%) held until project completion. Contractors complete work but do not receive full payment until closeout. Retainage stretches the timeline. For the full guide, see contractor retainage cash flow.

How payment terms affect cash flow

Longer terms create longer gaps. Retainage extends the wait. Draw schedules add approval time. Labor is paid weekly. Materials are paid on delivery. The result: money goes out before money comes in. Contractor working capital, contractor line of credit, and accounts receivable financing can bridge the gap. For a full overview, see contractor cash flow problems.

Related guides

For more terms, see glossary. For invoice delays, see construction invoice payment delays. For draws, see contractor draw schedule cash flow. For retainage, see contractor retainage cash flow. If you need to explore options, you can see what funding options may be available.

Frequently asked questions

What does net-30 mean in construction?

Net-30 means payment is due 30 days from the invoice date. Net-60 and net-90 extend the wait to 60 or 90 days. These terms are common in commercial construction.

What is a draw in construction?

A draw is a scheduled payment tied to project milestones. Contractors submit payment applications; the owner or lender approves and pays. The process can take 30–45 days or more.

What is retainage?

Retainage is a portion of payment (often 5–10%) held until project completion. Contractors complete work but do not receive full payment until closeout.

How do payment terms affect contractor cash flow?

Longer terms (net-60, net-90) create longer gaps. Retainage extends the wait. Draw schedules add approval time. Contractors often need financing to bridge these gaps.