Construction Credit Risk

Why payment risk in construction behaves differently from other sectors, with current figures on payment delay, contractor insolvency, and the limits of lien protection. Figures are dated to their source. 

Slow and inconsistent payment cost the U.S. construction industry $299 billion in 2025, equivalent to a hidden 14% tax on construction spending, according to Rabbet’s 2025 Construction Payments Report. Construction firms wait an average of 83 days to collect payment after completing work, nearly a month longer than the all-industry average, per the Construction Financial Management Association. 

Those figures point to a feature of construction credit risk that sets it apart: a supplier can be fully performed and still go unpaid even when the immediate customer remains solvent. 

The payment waterfall 

Money in construction moves down a chain: owner to lender to general contractor to subcontractor to supplier. Contracts at each tier often carry “pay-when-paid” or “pay-if-paid” clauses. Under a pay-if-paid clause, a general contractor’s obligation to pay a subcontractor is conditioned on the contractor first receiving payment from the owner. When money stops moving higher up the chain, the obligation to pay below it can stop as well, regardless of the work performed. 

That dependency shows up in how contractors price work. In Rabbet’s 2025 survey, 91% of general contractors said they factor an owner’s payment reputation into their bids, and 88% declined to bid on at least one project in the past year because of a slow-pay reputation. General contractors lose an average of 65 hours a month to payment administration, per the same report. 

The limits of a lien 

Mechanic’s lien rights are a backstop, but a conditional one. Lien claims carry strict filing deadlines that vary by state and lapse if missed, and retainage—commonly 5 to 10% of contract value—is typically withheld until project completion, extending the collection cycle. A lien also offers little when a project itself has run out of money and the parties higher in the chain have already been paid, because there may be no equity left to foreclose against. A lien right is not the same as payment. 

Insolvency is rising 

U.S. business bankruptcies reached 6,574 in the third quarter of 2025, the highest quarterly total since 2014 and 15% above the 2019 average, the second consecutive quarter above pre-pandemic levels, according to Coface. Total monthly bankruptcies reached 2,054 in December 2025, above the pre-pandemic monthly average of roughly 1,900, with the second half of 2025 averaging 2,167 per month, per ConstructConnect’s analysis of court data. 

Construction-specific cost pressure compounds the picture. ConstructConnect reports material prices rose 6.2% in 2025 while bid prices grew 2.7%, leaving contractors absorbing the difference. Coface expects insolvencies to remain above pre-pandemic levels through the second half of 2026. 

For a supplier or subcontractor, these conditions mean a single project’s payment risk depends on parties several tiers removed from the invoice. Trade credit insurance responds when a customer becomes insolvent or defaults, including cases where a lien is unavailable or unenforceable, and pays on a defined timeline rather than through the bankruptcy queue. Trade Credit Group (tradecredit.io) represents all of the carriers throughout the US who underwrite receivables insurance, including but not limited to Allianz Trade, Atradius, Coface, and AIG. 

Sources 

Rabbet, 2025 Construction Payments Report (slow-payment cost, GC bid behavior) — https://rabbet.com/reports/construction-payments-2025 

Construction Financial Management Association, construction collection cycle (≈83 days) — https://cfma.org/articles/protect-against-late-payments-with-construction-technology 

Coface, U.S. insolvencies rise above pre-pandemic levels (Q3 2025 figures; 2026 outlook) — https://www.coface.com/news-economy-and-insights/us-insolvencies-rise-above-pre-pandemic-levels-for-the-first-time 

ConstructConnect, Bankruptcies Are Rising, and Construction Should Pay Attention (Mar. 2026; monthly filings, material vs. bid prices) — https://news.constructconnect.com/bankruptcies-are-rising-and-construction-should-pay-attention 

General information only; not insurance, financial, or legal advice. Lien and retainage rules vary by state and project type.