A progress payment is a partial payment made to a contractor as specific milestones or phases of a project are completed, rather than paying the full amount at once.
Owners and contractors both benefit from staged payments.
What Does a Progress Payment Schedule Include?
- Payment milestones tied to project phases
- Inspection or verification before each release
- Retainage withheld from each payment
- Final payment tied to substantial completion
Why Are Progress Payments Important?
A construction loan for a new home typically releases progress payments tied to inspections at foundation, framing, and finish stages. Owners should confirm work is genuinely complete before releasing a progress payment, since money paid out ahead of completed work is difficult to recover.
Progress Payment vs. Retainage
Progress payments are the periodic releases of funds as work proceeds; retainage is the portion held back from those releases as extra protection for the owner until the project is fully complete.