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Progress payment
Also called progress billing, milestone payment, application for payment.
Payment released against work completed to date rather than on delivery of a finished job — standard in construction and custom manufacturing, and much harder to finance than an ordinary invoice.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
How it works on a construction job
A schedule of values divides the contract into line items. Each period you submit an application for payment showing percentage complete by line. The owner's architect or the lender's inspector certifies it. Retainage is withheld from each certified amount. Lien waivers from you and your subcontractors are exchanged for the funds. The withheld retainage is released at substantial completion, or later, or after a fight.
Why it is hard to finance
A progress bill is not an invoice for a completed, undisputed delivery. The customer can dispute percentage complete, and set-off rights in a construction contract are broad. Factors and asset-based lenders respond by treating progress bills as ineligible outright, or by advancing against them at a materially lower rate than they would against ordinary receivables. Retainage is almost always ineligible, whatever the rest of the schedule says.
On the equipment side
A manufacturer building a machine to order requires payments during the build. A lessor funds those through a progress payment or interim funding agreement, disbursing directly to the manufacturer against milestones and charging interim rent or interim interest on each disbursement from the date it is made. The lease term itself starts only when the machine is accepted.
Where this one catches people
The gap between paying and being paid is the whole cash flow problem of a progress-billed business, and financing narrows it far less than the headline advance rate suggests. You pay labour weekly and materials on 30-day terms, bill monthly in arrears, wait weeks for certification, and leave 5 or 10 percent in retainage that may sit for a year after the job finishes.
A factoring facility quoting 85 percent against ordinary invoices may advance well under that against progress bills and nothing at all against retainage — so the quoted rate overstates what the facility will actually produce on your book, sometimes by a wide margin. Ask the funder to price your real ledger, showing progress bills and retainage separately, before you sign.
On the equipment side, interim rent accrues from the date of each progress disbursement, not from the start of the lease. On a machine with a six-month build, that is six months of cost that was not in the payment you were quoted.
Worked through
Illustrative. A 600,000 contract billed monthly with 10 percent retainage.
In month three you certify 150,000 of work. Retainage withholds 15,000, so the approved payment is 135,000 on 45-day terms.
Your factor treats progress bills as eligible at a 70 percent advance rate rather than the 85 percent applied to your other invoices, and treats retainage as ineligible entirely. Advance: 135,000 × 0.70 = 94,500.
You have already spent roughly 120,000 on labour and materials for that work. Against 150,000 earned, you hold 94,500, with 40,500 waiting on the customer and 15,000 in retainage you may not see for a year.
On the ordinary 85 percent rate the advance would have been 114,750. The 20,250 difference is the cost of billing progressively, and it recurs every month.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Progress payment — common questions
What does progress payment mean?
Payment released against work completed to date rather than on delivery of a finished job — standard in construction and custom manufacturing, and much harder to finance than an ordinary invoice.
Where does progress payment catch people out?
The gap between paying and being paid is the whole cash flow problem of a progress-billed business, and financing narrows it far less than the headline advance rate suggests. You pay labour weekly and materials on 30-day terms, bill monthly in arrears, wait weeks for certification, and leave 5 or 10 percent in retainage that may sit for a year after the job finishes.
Is progress payment the same as an interest rate?
Progress payment is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does progress payment apply to?
Working Capital, Equipment Financing, Invoice Financing, Asset-Based Lending.
Is there a worked example of progress payment?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside progress payment?
Achievement of milestones, Advance rate, Draw, Eligible receivable, Ineligible receivables.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.