In 2024, the U.S. construction industry reached a new milestone: $280 billion in costs directly tied to slow payments. This alarming figure doesn’t just represent wasted money; it reveals a systemic issue that threatens project timelines, increases risks, and weakens relationships between contractors, developers, and lenders. At Rabbet, we’ve been tracking this trend for years, and the findings in our 2024 Construction Payments Report bring to light the far-reaching consequences of these inefficiencies.
But it’s not all bad news. In this blog post, we’ll explore the high-level data from the report and offer insights into what real estate developers and construction lenders can do to stay ahead of the curve. For the full picture—and to find out how you can make 2025 your most efficient and profitable year yet—download the complete report.
Slow Payments—A $280 Billion Problem to the U.S. Construction Industry
The cost of slow payments has been steadily rising; but in 2024, contractors, both general and subcontractors, report facing longer delays in receiving payment for their work—delays that, in many cases, now stretch over 30 days. This marks a concerning increase from previous years, with only 49% of contractors facing such delays just two years ago. Today, that number has surged to 82%.
So, where is this money going? The delays contribute to increased financing costs, missed deadlines, higher bids, and a growing reluctance from subcontractors to take on new work. According to our survey, 100% of subcontractors now consider a general contractor’s payment history before deciding whether to bid on a project—and when they do bid, they’re charging more. Slow payments are directly leading to higher costs and decreased availability of skilled labor.
For developers and lenders, this is a wake-up call. The ripple effect of slow payments is not confined to contractors. It’s driving up project costs, creating delays, and increasing risks that can jeopardize the success of your development.
Contractors Are Shouldering the Burden
One of the most troubling findings in this year’s report is how much contractors are personally sacrificing to keep projects afloat. Nearly all general contractors now float payments to subcontractors while waiting for payment from developers or lenders. This isn’t a simple juggling act—contractors are tapping into personal retirement accounts, relying on credit cards, and incurring hefty interest charges just to pay their teams. This unsustainable practice that could push many firms to the brink.
For developers, this reality should raise alarms. Contractors are facing an untenable financial burden, and this stress is increasing the risk of project disruption. More contractors are filing liens, more subcontractors are walking away from projects, and the number of construction firms teetering on the edge of bankruptcy is growing. If these trends continue, 2025 could see even fewer qualified contractors available, with those remaining charging much higher premiums.
The Construction Industry’s Role in Fixing the Payment Crisis
You might be thinking: “This is a contractor problem.” But the data suggests otherwise. Developers and lenders are major contributors to the slow payment issue. One of the leading causes of delayed payments stems from inefficiencies in the draw request process—a process that directly involves both lenders and developers. When payment requests get bogged down by manual entry, siloed systems, and outdated workflows, it’s not just the contractor who suffers. The project suffers, too.
The report also reveals that general contractors are passing these costs onto developers. In fact, 97% of general contractors said they’ve increased the price of their bids in 2024 to account for the delays and additional financing costs they’ve incurred. Developers who are slow to pay are paying more for their projects, and if these inefficiencies aren’t addressed, the cost of slow payments will continue to rise.
For lenders, this should be an even bigger concern. When developers struggle to issue timely payments, the risk profile of the entire project shifts. Delayed projects, cost overruns, and labor shortages are all warning signs that lenders monitor closely. If a developer can’t meet payment expectations, it could affect future financing terms and overall project viability.
What’s the Solution to Slow Payments in the Construction Industry?
Thankfully, there are actionable steps developers and lenders can take now to mitigate the impact of slow payments—and many forward-thinking firms are already implementing these strategies. In fact, the report found that developers who use software to manage payments are seeing significant improvements in payment speed and efficiency. According to our survey, general contractors report a 68% reduction in payment processing time when developers adopt purpose-built technology.
The right tools can streamline the entire draw request process, eliminating bottlenecks and reducing the likelihood of delays. Real estate developers and lenders who invest in technology are not only benefiting from lower costs but also securing better partnerships with contractors who are willing to offer discounts in exchange for faster, more reliable payments. General contractors surveyed said they would offer up to a 14% discount for developers who guarantee timely payments.
Looking Ahead and How to Thrive in ’25
The real question facing the industry now is: what will you do to thrive in 2025? For developers and lenders alike, the key to a successful future lies in operational efficiency. Payment delays are one of the few areas where real estate professionals can immediately improve outcomes and control costs. With so many unknowns still looming in the economic landscape, now is the time to make these changes.
The findings in the 2024 Construction Payments Report provide critical data to help developers and lenders re-evaluate their payment processes, improve relationships with contractors, and reduce financial risk. By making strategic changes today, you’ll position your projects to be more competitive in the year ahead.
If you’re interested in seeing how these trends play out across the industry—and learning what you can do to protect your bottom line—we invite you to download the full report. Inside, you’ll find detailed data, trends, and actionable recommendations that can help you navigate the complexities of today’s construction landscape.
