Film Accounting Glossary
Completion bond
What is a completion bond?
Also called completion guarantee.
A completion bond is a guarantee, issued by a completion guarantor, that the picture will be delivered on schedule and to specification or the guarantor will fund the shortfall or repay the financiers.
Lenders on independent films usually require one before releasing money. The bond comes with real oversight: approval rights over budget and schedule changes, access to the books, and the ability to take over the production.
Example
A lender advancing $7M against presales requires a bond before releasing a dollar. If the picture runs $600,000 over with three days left to shoot, the guarantor funds the finish and takes its position in the waterfall ahead of equity.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Closed before the loan funds. It brings weekly reporting duties, approval rights over budget changes, and step-in rights for the whole shoot.
Common mistake
Reading it as insurance that pays out. It is a guarantee of delivery, and calling on it hands real control of the production to the guarantor.
Related questions
- Who requires a completion bond?
- Lenders on independent films, almost always, before releasing loan funds. Equity sometimes asks for one too, since it sits behind debt in recoupment.
- What happens if a completion bond is called?
- The guarantor funds the shortfall to finish and deliver the picture, and takes a senior recoupment position, ahead of equity, for whatever it advanced.