When Do Contractors Get Paid on a Project? (Progress Draws, Milestones, Lien Rights)

By Fabio Freire, Founder & General Contractor at EZ-Estimates. Published 2026-07-17.

When Do Contractors Get Paid on a Project? (Progress Draws, Milestones, Lien Rights)

Ask any contractor what kills their business faster than bad estimates and the answer is not scope creep, not subs, not permits. It is cash flow. Payment terms buried in contracts, clients who "pay net-30 to their vendors" when the contract says net-15, and the awkward conversation about when to stop work if the check has not cleared. Getting paid on time is 50% of running a profitable construction business. And most GCs get this part badly wrong.

Here is how contractors actually get paid on construction projects, when the money should hit your account, and what your options are when it does not.

The Three Main Payment Structures

Construction payment structures fall into three categories. Every contract should clearly state which one applies:

1. Fixed-price / lump-sum with progress draws. Most common on residential renovation. Total contract price, paid in scheduled installments.

2. Time and materials (T&M). Billed on actuals. Common on complex or unclear scope. Requires detailed daily logs.

3. Cost-plus. Client pays actual cost plus a fee (fixed or percentage). Common on custom builds. Requires open books.

Most residential GCs run some hybrid: base contract is fixed-price with progress draws, change orders are cost-plus with markup.

Progress Draw Schedules (Fixed-Price Contracts)

The progress draw schedule is how you get paid over the life of a fixed-price contract. Typical structures:

Residential renovation (mid-size $50k-$300k):

Draw #	Trigger	% of Contract
Deposit	Signed contract	10-20%
Draw 1	Demo complete + rough framing	15-20%
Draw 2	Rough MEP complete (plumbing, electrical, HVAC)	20-25%
Draw 3	Drywall complete + insulation inspected	15-20%
Draw 4	Cabinets/tile/finishes complete	15-20%
Final	Substantial completion + punch list	10-15%

Larger custom home ($500k-$2M+):

Weekly or bi-weekly draws based on % complete, with 5-10% retainage held until final completion.

Small jobs (under $10k):

50% deposit / 50% completion is standard. Some jurisdictions cap the deposit at 10% or $1,000, whichever is less. Check your state.

Milestone-Based Payment vs Percentage-Based

Milestone-based: Each draw is triggered by completing a specific measurable milestone. "Rough plumbing passes inspection" = draw released. Very clear, hard to argue.

Percentage-based: Each draw is a % of total contract. Contractor invoices based on % complete. Client verifies. Owner/lender may require an AIA G702/G703 form for larger projects.

For residential work, milestone-based is cleaner. For commercial or lender-financed work, percentage-based (AIA form) is standard.

Common Payment Terms (Net Terms)

Once you invoice, when should you actually get paid?

Common invoice terms:

Due upon receipt
Net 7
Net 15
Net 30
Net 45 (mostly commercial)

For residential GCs, you should be pushing for due on presentation or net 7. The contract term is what you enforce.

If the contract says net 15 and the client pays net 30, that is a breach. Every day past your terms is a day they are financing their project with your money.

When to Stop Work if Not Paid

This is the awkward one. Contractors are afraid to stop work because they do not want to damage the relationship. But continuing to work while not being paid is how you go bankrupt.

Recommended rule: work stops if a draw is more than 5 business days overdue.

The conversation script:

"Hey [client], the second draw was due on [date]. It has been 6 business days. Per our contract, work pauses until payment is caught up. I understand things come up, and I want to keep this moving. Can you tell me when the payment will land so I can put the crew back on Monday?"

Notice what is NOT in that script:

No apology
No begging
No emotional language
No threats
Just facts and a clear ask

Every contract should have a "suspension of work" clause. Standard language:

"Contractor may suspend work if any payment is more than five (5) business days past due. Contractor has no obligation to remobilize until all past-due amounts are paid in full. Any delay resulting from suspension of work is at owner's cost and does not obligate contractor to complete work by the original completion date."

That language protects you legally and gives you the language for the conversation.

Lien Rights (Your Biggest Leverage)

Mechanics' liens are the contractor's biggest legal tool for getting paid. In most US states and Canadian provinces, if a contractor performs work and materials are used on real property, that contractor has automatic lien rights against the property.

Basic lien process:

Preliminary notice. In many states (CA, TX, NV, and others), contractors must send a "20-day notice" or "preliminary notice" within a specific time window (usually 20-60 days after starting work) to preserve lien rights. Missing this deadline can void your lien rights.
Notice of intent to lien. Optional in some states, required in others. Formal notice that if payment is not received within X days, a lien will be filed.
Recording the lien. File the mechanics' lien with the county recorder. Must include specific information about the property, contract, and unpaid amount. Deadlines vary by state (typically 60-120 days after last work).
Foreclosure. If the lien is not paid, the contractor can foreclose on the lien. Timeline varies (typically 6-12 months in most states).

Just recording the lien often forces payment because the property cannot be sold or refinanced with an unpaid lien on record. The mere threat of a lien resolves most disputes.

Warning: Lien laws vary dramatically by state. What works in Texas does not work in Massachusetts. Consult a construction attorney in your jurisdiction and set up a lien-notice system.

Lien Waivers (When You Get Paid)

Every time you receive a draw, the client (or their lender) may ask you to sign a lien waiver. This waives your lien rights on the amount just paid.

Two types:

Partial waiver: Waives rights on the amount just paid. Preserves rights for unpaid balances.
Final waiver: Waives all lien rights on the project. Only sign at the end.

Never sign a final lien waiver until you have been paid in full.

Standard practice: give partial waivers with each draw. Sign the final waiver only when the last payment clears.

See the lien waiver template for standard language.

Retainage

Retainage is a percentage of each draw (typically 5-10%) that the client holds back until final completion. Common on:

Commercial jobs
Lender-financed residential
Some large custom homes

Retainage is negotiable. Push back on it in residential work: "Progress draws are milestone-based and each milestone is inspected. Retainage is not necessary. Final draw acts as retainage."

If retainage is required, negotiate for release timing: "Retainage is released within 10 business days of certificate of occupancy" is stronger than "retainage is released 60 days after final completion."

Sub Payments (You Pay Subs After You Get Paid)

If you are a GC, you pay subs after you get paid. That is standard. Your subcontracts should include language:

"Subcontractor payment is due within seven (7) business days of GC receiving corresponding payment from owner. Subcontractor may not stop work solely for owner nonpayment. GC will suspend work in the event of owner nonpayment and notify subcontractor accordingly."

That protects your cash flow.

Deposits (State-by-State Limits)

Some states cap contractor deposits:

California: 10% or $1,000, whichever is less
Massachusetts: 33% max
Maryland: 33% max
New York (home improvement): 50% max
Most states: No specific cap

Even where legal, huge deposits look predatory. 10-20% is professional. 50% deposit on a $200k job feels like a scam. Structure your progress draws so early draws happen soon after work starts, not by loading a giant deposit.

Common Payment Mistakes Contractors Make

Not enforcing terms. If your contract says net 7 and you accept net 21 without pushback, you have re-set the terms. Enforce what is written.

Working past overdue draws. Every day you work while owed money is a day you may not collect. Stop when the clock says stop.

Signing final lien waivers before final payment. Never. If the client insists, ask for a "conditional final waiver" that only takes effect upon receipt of the final check.

Skipping preliminary lien notices. In lien-friendly states, missing the 20-day notice deadline can void your lien rights. Set up a system.

Not tracking retainage. On a $500k contract with 10% retainage, that is $50,000 you might forget to invoice for at the end. Track it.

Underpricing deposit vs early draws. If your first draw does not hit until 6 weeks in, you are floating 6 weeks of labor and materials on your own credit. Move the schedule earlier.

Sample Payment Schedule for a $180,000 Bathroom + Kitchen Renovation

Draw	Trigger	Amount
Deposit	Signed contract	$27,000 (15%)
Draw 1	Demo + rough framing complete	$36,000 (20%)
Draw 2	Rough MEP complete + inspected	$36,000 (20%)
Draw 3	Drywall + tile substrate complete	$27,000 (15%)
Draw 4	Cabinets + counters + tile finish complete	$27,000 (15%)
Draw 5	Fixtures + trim + paint complete	$18,000 (10%)
Final	Substantial completion + punch list signed	$9,000 (5%)

Each draw due within 7 business days of milestone completion and invoice.

Track Every Draw and Payment With EZ-Estimates

Progress draws, invoices, retainage tracking, and payment due dates are where solo GCs and small teams lose the most money. A missed draw is $30,000 sitting on the client's side of the table.

EZ-Estimates ties your estimate to your invoices and payment schedule automatically. Milestones trigger draw requests. Overdue payments alert you. Retainage is tracked to the final penny.

Free 14-day trial. Plans start at $99/month. No credit card. Stop financing your clients' projects with your own cash.

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