Can you borrow against retention money? What to use while the head contractor holds it

Rarely, and not on its own. Retention money is a payment the head contractor owes you only once conditions are met, usually practical completion and then a defects period. Because release depends on things outside your control, most funders won’t lend directly against it. What usually works is funding what’s already payable, using equipment or property you own, or arranging a facility that rides out the wait.

Retention is the oddest asset on a subbie’s balance sheet. It’s yours, it’s recorded, and for months you can’t spend it. This guide asks the question this site always asks: what stands behind the loan? For retention, the honest answer is “not much”, so the job is to find what does.

Why won’t a lender lend against retention money?

Look at it from the lender’s chair. A funder wants a debt that’s due, undisputed and collectable. Retention is none of those yet.

• It’s conditional. Release usually follows practical completion, then the end of the defects liability period. A rectification dispute can hold it.
• It can be reduced. Defects, back-charges or delay claims can be set against it before it’s paid.
• It sits behind someone else’s job. Your release is often tied to what the head contractor receives from the client, so you’re exposed to a chain.
• It’s easy to double-count. A funder already advancing on your progress claims doesn’t want to count the same job’s retention again.

That doesn’t make the money worthless. It means a lender rates it well below an invoice that’s certified and due. Treat it as a timing gap to bridge, not as the collateral.

What can you borrow against instead?

Work down the balance sheet from firmest to softest.

Starting point	Why a funder rates it	Watch for
Certified progress claims and invoices	A defined debt from an identifiable payer	Disputed claims, pay-when-paid terms, concentration in one head contractor
Equipment and vehicles you own	Physical, serial-numbered, resaleable	A lender counts resale value, not cost; check the PPSR first
Property equity	The firmest security of all	Cost and time; it ties up a home or commercial property
A line of credit sized on turnover and statements	Looks at your trading, not one job	Limits move with your revenue
Signed contracts	Shows work ahead	Usually supports a facility rather than standing as security

The trades and construction page maps these to the usual cash-flow squeezes. For the invoice route specifically, see funding unpaid invoices; for gear, borrowing against equipment you own explains why a machine counts for less than you paid.

If you’d rather skip the guesswork, tell us what you hold and what’s stuck and we’ll look at which of these routes fits.

What mistakes make the wait more expensive?

Owners in this spot tend to repeat the same few errors, and each one costs real money.

• Funding the retention against the wrong asset. Pledging a ute or a trailer to cover a job’s retention ties up gear you need to win the next job. Count what’s left before you sign.
• Taking a short fix for a long gap. Retention can be held for a year or more. A facility that must be cleared in a few months turns a timing gap into a second problem. Match the term to the release dates on your schedule.
• Overlapping security. If a bank already holds a general security over your business assets, a second funder’s claim can clash with it. The PPSR shows what’s registered, and our guide on combining funding routes without clashing covers priority in plain English.
• Forgetting the defects clock. Many owners chase practical completion and then let the defects-end date slide. A fortnight’s delay in claiming can become a month in payment.
• Not reading the release clause. Some subcontracts tie your release to what the head contractor gets paid. That changes both your timing and how a funder reads the risk.

An illustrative example

Suppose a subcontractor completes a $400,000 package for a head contractor. Retention is 5%, so $20,000 is held. Half is released at practical completion and the balance after defects. (Illustrative only; your contract sets your own terms.)

The subbie has $60,000 of certified claims waiting on approval, a second job starting, and wages due before either pays. Asking a funder to lend against the $20,000 gets a polite no. Asking it to advance against the $60,000 of certified claims, with the retention schedule shown as context, gets a real conversation.

Same business, same job, different starting point. The retention is still coming. The loan just doesn’t depend on it.

Does a retention trust scheme change the answer?

It makes retention safer, not faster. A trust scheme requires the head contractor to hold withheld retention separately, so it’s protected if they fail. It doesn’t change your release date.

The rules differ by state, so check your own contract:

• Western Australia: the retention trust scheme covers new construction contracts of $20,000 or more including GST, with the threshold taking effect from 1 February 2024. Contracts entered into before the relevant start date aren’t pulled in later, and some residential and government head contracts are excluded. See the Building and Energy scheme page.
• New South Wales: head contractors on larger main contracts must hold retention in trust for subcontractors. The value threshold sits in the Security of Payment Regulation, so check the current in-force text for your contract.
• Queensland: trust accounts apply on defined project types and values. Further expansion was reportedly paused in 2025 pending a government review, so confirm the current position on the QBCC trust account pages.

For funding, the practical effect is small but real. A subcontract inside a trust scheme gives a lender a bit more comfort that the retention will exist when released. It still won’t be treated like an invoice that’s due.

How do you stop retention choking the next job?

Three habits help.

1. Keep a retention schedule. One page per job: contract, amount held, who holds it, release triggers and expected dates. Lenders read it as proof you manage the delay.
2. Ask about a retention bond on new contracts. If the subcontract allows it, a bond replaces cash retention. You receive what would have been held. The bond provider will want security or a deposit, so you’re swapping a locked asset for a cost. Do that sum with a total-cost view before you agree.
3. Chase release dates. Practical completion and defects-end dates are triggers. Diarise them and claim in writing when they arrive.

Watch tax timing too. GST on what you’ve invoiced can fall due before retention is released, and quarterly BAS for October to December is due on 28 February 2027 per the ATO due dates. Ask your accountant how retention is treated on your accounting method, so the money you’ve set aside matches what you’ll owe.

What do lenders want to see when retention is part of the picture?

A short pack makes a big difference, and the structure is in build a funding pack lenders want:

• bank statements showing the lumpy receipts;
• an aged debtors list that separates claims due from retention held;
• the retention schedule;
• your equipment list, with serial numbers, if gear may be offered as security;
• the signed subcontracts for the jobs you want to fund.

When the retention is separated clearly, a funder sees a trading business with timing gaps. When it’s mixed into a debtors total, they see a ledger they can’t trust.

What if the retention is the biggest thing you’re owed?

Sometimes a business has done a run of jobs and most of its earnings are sitting in retention. A funder will then look harder at your trading history than at the jobs themselves: how long you’ve traded, how steady the receipts are and whether past retention was released on time. That’s why the retention schedule matters. A record showing that earlier retention arrived when the contract said it would is evidence that the current balance is collectable, even if it isn’t security.

It also helps to be realistic about size. A facility sized on turnover will often be smaller than the retention you’re waiting on. That’s normal. The aim isn’t to unlock every dollar early. It’s to cover wages, materials and the BAS until the first release lands, so you can keep taking work instead of declining it.

Where do you go from here?

The right route depends on what you hold. If your money is stuck in certified claims, invoice-based funding fits. If it’s stuck in plant and ute payments, an equipment-secured facility might. If you have property equity, that opens a wider range. If it’s mostly retention and little else, a smaller line of credit sized on your turnover may be the sensible detour.

Most subcontractors waiting on retention aren’t failing. They’re doing the work, and the money is parked. If that’s you, we’d like to look at what you’ve already earned and find a route that doesn’t lean on the part you can’t touch yet. Our funding finder is a quick first pass.

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