Completion Bond

Definition

A completion bond is a financial instrument used in the film and television industry to ensure that a project is completed on time and within budget. It serves as a form of insurance for investors and production companies, guaranteeing that the production will be delivered as promised, even if unforeseen circumstances arise. Completion bonds help mitigate financial risk by providing funding to complete the project if the original budget runs short.

5 Must Know Facts For Your Next Test

1. Completion bonds are typically required by financiers before they commit funds to a production, ensuring they have protection against potential losses.
2. These bonds are usually issued by specialized bonding companies that assess the project's budget, schedule, and overall viability.
3. If a project fails to complete, the completion bond company will step in to provide the necessary funds to finish production, protecting the investors' interests.
4. The costs associated with obtaining a completion bond can vary but are generally around 2-5% of the total production budget.
5. Having a completion bond can enhance a project's credibility and attract more investors, as it shows a commitment to delivering the final product.

Review Questions

• How does a completion bond function as a risk management tool for producers and investors?
  • A completion bond functions as a risk management tool by providing financial assurance that a production will be completed on time and within its budget. It protects producers and investors from potential losses due to unforeseen circumstances that might halt or delay production. By securing a completion bond, producers can reassure investors that their funds are protected, ultimately making it easier to secure financing for the project.
• Discuss the process of obtaining a completion bond and its implications for production budgets.
  • Obtaining a completion bond involves presenting detailed financial and scheduling information to bonding companies, which evaluate the project's feasibility. The bonding company assesses factors like the budget, cast, crew, and previous track records of the production team before issuing the bond. This process can influence production budgets since filmmakers must account for the cost of securing the bond, typically 2-5% of the total budget, which can affect overall financing and resource allocation.
• Evaluate how the presence of completion bonds impacts relationships between filmmakers and financiers in the production industry.
  • The presence of completion bonds significantly impacts relationships between filmmakers and financiers by fostering trust and reducing perceived risks. When filmmakers obtain completion bonds, they demonstrate a commitment to fulfilling their obligations, which can lead to more favorable terms from financiers. This assurance can enhance collaboration and open doors for future projects, as financiers are more likely to invest in filmmakers who have successfully completed previous projects with bonded guarantees.

Related terms

Production Insurance: A type of insurance that covers risks associated with film and television production, including equipment damage, liability, and accidents on set.

Budget Overrun: A situation where the actual costs of a project exceed the initial budget, often requiring additional funding to complete the production.

Financier: An individual or organization that provides funds for a film or television project, often requiring assurance of completion through instruments like completion bonds.