Typical payment terms for contractors. A plain-English 2026 guide

The contract says Net 30. The check shows up 83 days later.

That gap is where most contractor payment disputes live. The terms on paper describe a clean monthly cycle: invoice, review, payment, repeat. The terms in practice involve progress draws, a schedule of values, retainage, a closeout, and a stack of state laws that decide whether the GC has to pay you even when the owner doesn't.

This post covers the payment terms a general contractor actually negotiates and the legal scaffolding that decides when the money moves. Read it once. Then put it next to your next contract.

Net 30, Net 60, Net 90. The headline term

Net 30 is the default for U.S. construction. The customer has 30 days from the invoice date to pay. Anything later than that triggers late fees if the contract says so.

The spread:

• Net 10 / Net 15. Small residential jobs, single-trade work, or any contract where the contractor calls the shots and the customer doesn't have AP infrastructure.
• Net 30. The middle of the bell curve. About half of construction businesses give customers 30 or more days, per industry survey data. This is what your AIA G702 cycle is built around.
• Net 45 / Net 60. Mid-size commercial. The owner is a corporation with monthly AP cycles and a sign-off chain. You're not waiting on the work, you're waiting on a controller.
• Net 90. Large institutional or public work. Sometimes a deliberate squeeze. Sometimes just how the agency runs.

The number on the contract is the ceiling, not the average. A 2024 industry survey put the average days-to-pay for commercial subs at 83 days. The contract said Net 30 and reality said Net 83.

Progress payments. How the money actually moves

On any job longer than a few weeks, you don't bill once. You bill against a schedule of values, every month, for the percent of each line item you completed in the period.

The standard cycle:

1. The contract names a cutoff date for the period (often the 25th of the month).
2. The contractor submits an application for payment, usually AIA G702/G703, within a few days of cutoff.
3. The architect or owner's rep reviews and certifies the pay app.
4. Payment lands 15 to 45 days later, depending on contract terms.

Each progress payment carves a slice off the contract sum. Each one rides with a conditional lien waiver for the amount requested. Each one is short of the full amount earned, because retainage gets withheld at the top of the cycle.

If the workflow side of pay apps is new to you, GC pay software walks through what construction payment software actually does.

Retainage. The 5 to 10 percent the GC is sitting on

Retainage (sometimes called retention) is the slice of every progress payment the owner holds back as a hedge that the job will finish. Standard practice is 5 to 10 percent.

The state floor and ceiling matter:

• California. Starting January 1, 2026, private retainage is capped at 5 percent under SB 61 (Civil Code § 8811).
• New York. Private retainage capped at 5 percent under the 2023 Retainage Law.
• Texas. Private retainage capped at 10 percent.
• Alabama. 10 percent until the job hits 50 percent complete, then no more retainage on future progress payments.
• Nevada. Cannot exceed 5 percent of any payment.
• New Mexico. Retainage on private projects is prohibited.
• Most other states. No statute. The owner and contractor negotiate inside the 5 to 10 percent band.

The mechanical part is simple. The owner withholds 5 to 10 percent of every certified pay app. The retainage stays in escrow (or just on the owner's balance sheet) until substantial completion, sometimes until final completion. At closeout, the contractor submits a final pay app for the retainage balance plus any remaining work.

The financial part is brutal. On a $2 million sub contract at 10 percent retainage, the sub is fronting $200,000 to the GC for the duration of the job. That money is paying for the sub's labor and materials with no return. It only releases when the closeout finishes.

The final payment. Closeout and the unconditional waiver

The last invoice on a job is the final pay app. It usually contains:

• The remaining contract balance
• The retainage release
• Any approved change orders that ran through the period
• Punch-list completion certifications
• An unconditional final lien waiver, signed once the check clears

The closeout payment is the one most likely to drag. Owner inspections, architect sign-off, lender approval, retainage release timing — they all stack up. Federal jobs require the agency to pay the prime within 30 days of the final invoice under FAR 52.232-27. Private jobs run on whatever the contract says.

The unconditional final lien waiver is the document that closes the lien-rights loop. You don't sign it until you have the money in the account, because the moment you sign, your lien rights for the entire job are released regardless of what happens next.

Pay-when-paid vs pay-if-paid. The clause that changes everything

These two phrases look almost identical. They aren't.

Pay-when-paid. A timing clause. The GC has a reasonable time to pay the sub after receiving payment from the owner. If the owner pays slowly, the GC pays slowly. If the owner never pays, courts in most states still require the GC to pay the sub eventually. The clause is a delay tool, not a risk-shift.

Pay-if-paid. A condition-precedent clause. The sub gets paid only if the GC gets paid by the owner. If the owner defaults, the sub eats the loss. This shifts the entire owner-payment risk down to the sub.

The legal split is where it gets sharp.

Pay-if-paid clauses are unenforceable in:

California, Delaware, Illinois, Indiana, Kansas, Montana, Nevada, New York, North Carolina, Ohio, South Carolina, Utah, Wisconsin, and Virginia.

Virginia is the newest addition (2022). In every other state, a pay-if-paid clause is enforceable, but only if the contract uses clear, specific language transferring the owner-payment risk to the sub. The phrase "pay if paid" alone is not enough. Courts want explicit condition-precedent wording.

Read every subcontract you sign for these two phrases. The difference between them is the difference between waiting 90 days for your money and never getting it. Levelset's state-by-state breakdown is a good starting reference.

Prompt Payment Acts. The federal floor and the state versions

The federal Prompt Payment Act was passed in 1982 to force federal agencies to pay their bills on time. The construction-specific rule sits at FAR 52.232-27 and applies to every federal construction project.

The timing rules for federal jobs:

• Agency to prime contractor: 14 days after invoice for a progress payment, 30 days after the final invoice.
• Prime to direct subs: 7 days after receiving the agency's payment.
• Each tier below: 7 days to pay the next tier down.

Late payments trigger automatic interest under 5 CFR Part 1315. The interest accrues whether or not the lower-tier party asks for it.

Nearly every U.S. state has its own version of the Prompt Payment Act for state and local public works, and many have private-job versions too. The deadlines vary (10 to 30 days is the typical band), but the structure is the same: invoice, statutory deadline, interest if late.

The federal Act doesn't give a sub a private right of action against the prime directly, so most disputes still resolve through lien rights, bond claims, or breach-of-contract suits. The Act sets the floor and the interest rate. The lien waiver paper trail is what actually wins the case.

Where lien waivers fit in every payment moment

Every payment milestone in this post is a lien waiver moment.

• Submit the pay app → send the conditional progress waiver for the requested amount.
• Check clears → send the unconditional progress waiver as proof.
• Final pay app → send the conditional final waiver.
• Final check clears → send the unconditional final waiver. Job closes.

That's four waiver moments per period times every period times every sub on the job. On a 12-month, 20-sub commercial job, that's hundreds of waivers. Miss any one and the GC carries lien exposure into the next cycle.

Subcontractor payment software and construction pay app software exist because spreadsheet-tracking that volume of paper is how mistakes happen. LienDone runs the waiver side of the loop. Pay apps and payment processing live in adjacent tools.

If you want the day-to-day flow on the waiver side, how to send a lien waiver in two minutes walks through the link → sign → log flow that pairs with each pay app.

The takeaway

The contract names a number. Net 30, 5 percent retainage, pay-when-paid. The money moves on a calendar shaped by:

• The contract's payment term (Net 30 to Net 90)
• The progress payment cycle (monthly, against the schedule of values)
• The state's retainage cap (5 to 10 percent, sometimes zero)
• Whether the contract uses pay-when-paid or pay-if-paid
• The applicable Prompt Payment Act (federal or state)

Memorize those five levers. Renegotiate the ones that hurt before you sign. Then run the lien waiver paper trail every time the money touches an account. That's the loop.

FAQ

What is the standard payment term for contractors?

Net 30 is the most common. About half of construction businesses give customers 30 or more days, and 8 percent give over 45 days.

How long does it actually take a sub to get paid?

On commercial jobs, around 83 days from invoice to deposit. The contract says Net 30. Reality says longer.

What is a typical retainage percentage?

Five to ten percent, depending on state. California and New York cap private retainage at 5 percent. Texas allows 10 percent. New Mexico prohibits retainage on private jobs.

Is pay-if-paid legal in my state?

Unenforceable in 14 states. Enforceable in the rest only with clear, specific contract language. The phrase pay-if-paid alone is not enough.

How fast does the federal Prompt Payment Act require payment?

Agency to prime: 14 days for progress, 30 days for final. Prime to sub: 7 days after the prime gets paid.

Why does a lien waiver sit at every payment moment?

Because the waiver is how the GC proves the sub gave up lien rights for the money that moved.