What is the term for the amount withheld from each draw request in construction contracts until completion?

The term for the amount withheld from each draw request in construction contracts until completion is referred to as retainage. This practice serves as a financial assurance mechanism for owners and clients to ensure that contractors complete the project satisfactorily and address any outstanding issues before final payment is made. Retainage is typically a percentage of each payment request from the contractor during the project and is released upon satisfactory completion of the work, protecting the client's investment in the project.

Retention and retainage are terms that might seem interchangeable at first glance, but retainage specifically indicates the practice related to construction contracts, while retention may refer to similar concepts in broader contexts. A good faith deposit usually relates to an initial payment to secure a contract rather than amounts withheld during project execution. Withholding can apply to various scenarios where payments are paused or not fully released but does not capture the specific construction context encapsulated by retainage. Understanding these distinctions helps clarify the terminology used in construction finance and contracts.