A percentage of each progress payment (typically 5-10%) that the owner or GC withholds until the job is fully complete and accepted.
Retainage is the chunk of every invoice that gets held back to make sure the contractor (or sub) finishes the job and addresses punch-list items. 5-10% is typical; some commercial contracts go up to 10% on the first 50% of the contract and 0% after that.
The retainage gets released at substantial completion or final acceptance — but in practice, it often sits with the owner for 30, 60, even 180 days while everyone signs off.
Watch for trickle-down: if a GC has retainage held against their own contract, they almost always hold the same percentage on every sub. That can mean a sub is waiting on $20K of their own money long after the job's done.