Business line of credit for a contractor with retention

The situation

This is an anonymised composite reflecting a recurring pattern, not a specific settled transaction. A subcontracting business working across several construction projects has a meaningful portion of each progress claim withheld as retention, released only once each project reaches practical completion, sometimes many months after the corresponding work was actually performed and paid for in labour and materials.

Why it's hard

The business has genuinely earned this money, but cannot access it until each project's completion, while still needing to fund wages, materials and overheads for current and upcoming jobs in the meantime. Retention held across several concurrent projects, at varying stages, creates an unpredictable and hard-to-forecast cash flow gap that grows as the business takes on more work.

How it can be structured

A revolving business line of credit, secured against property or other business assets, sized to smooth the gap created by retention held across the business's current project pipeline, is the standard structure, drawn down as needed and repaid as retention is progressively released; the exit each cycle is the release of retention on completed projects. Where the business's invoicing to head contractors is well documented, invoice finance against those progress claims, net of the retained portion, can supplement or substitute for a line of credit, particularly for a larger contractor with a substantial receivables position. Lenders assessing either structure will want visibility into the business's current project pipeline and the retention schedule across each job, since this is what actually drives the size and timing of the cash flow gap being funded.

Because retention schedules vary between head contracts, some released only at practical completion and others staged with a portion released earlier and the balance held through a defects liability period, providing a clear, project-by-project breakdown helps the lender build an accurate picture of when funds are actually likely to be released rather than relying on a single average assumption across the whole pipeline. Where the subcontractor has a long-standing relationship with a small number of head contractors known for reliably releasing retention on schedule, this track record can be presented as a positive factor, since payment history with specific counterparties is often a better predictor of future releases than industry averages alone. Some lenders will also periodically review the facility limit as the project pipeline changes, increasing it during a period of growth in retained amounts across several concurrent jobs and scaling it back once major projects complete and retention is released. A clear separation between funds drawn to cover retention timing gaps and funds drawn for entirely separate working capital purposes helps both the contractor and the lender monitor the facility's actual utilisation against its intended purpose.

What it typically costs

Pricing reflects the business's trading history and the security offered, quoted on enquiry once a lender has reviewed the project pipeline and retention schedule. A line fee on the facility limit and interest on funds drawn is the standard cost structure, consistent with a revolving facility.

Timeline

1. Same day — scoping call confirming current projects, retention amounts and expected release dates.
2. 3–5 business days — document collection, including project contracts and retention schedules.
3. 5–10 business days — lender matching and approval.
4. 3–5 business days — settlement and facility limit made available.

Questions we'd ask you

1. How many current projects hold retention, and what is the total amount currently withheld?
2. What are the expected practical completion dates across those projects?
3. What security is available to support the facility — property or other business assets?
4. What does your typical monthly wage and materials outlay look like across current jobs?
5. Would invoice finance against your head contractor progress claims be a fit alongside, or instead of, a line of credit?

Related

Business lines of credit · Invoice finance · Builders & trades · Retention