How Much Do I Have to Pay Upfront for Film Completion Bond?
A film completion bond represents a guarantee. One that ensures a film project will be finished and delivered on schedule. All within the predetermined budget decided between the producer and investors involved. Completion bonds ensure monetary compensation on mid- to high-budget film projects regardless of the outcome. The completion bond is assurance to banks and financiers that the film will be completed. That the project will remain on budget. Completion will be in accordance with the schedule and advance sums involved. And that the production will not be abandoned. But how much do I have to pay upfront for film completion bond to secure this guarantee?
What is a Film Completion Bond?
A motion picture completion bond represents a written contract. That guarantees the completion of a motion picture, on budget, and on schedule. Which is backed by the completion bond guarantee.
The purpose of the film completion bond is to provide banks and other film financiers the guarantee. Ensuring that the project they are investing in will finalize according to plan.
In exchange for the “strike price” which represents the production price, the completion guarantor ensures interest in the production of a film and that the first proceeds from film distribution will go towards paying off losses incurred by the bonding company.
How Much Do I Have to Pay Upfront for Film Completion Bond?
If you’ve been asked to obtain a film completion bond, you’re probably wondering, “How much do I have to pay upfront for film completion bond?”
The price that you will pay upfront is generally negotiable but will comprise of between 3 and 5% of the total bond amount based on the risk assessment that is completed by the completion guarantor.
Because of the large upfront cost involved in securing a completion bond, these are generally retained for mid to high-range budget independent film productions.
How is Risk Assessment Determined for the Completion Bond?
So, if you’re wondering, “How much do I have to pay upfront for film completion bond?” And after hearing that the upfront cost is based on the risk assessment. You are probably wondering what you can do to limit the risk and therefore reduce the upfront fees.
Completion Guarantor
The completion guarantor will complete a risk assessment. One that involves careful scrutiny of the key persons involved in your production.
Including the director, first assistant director, the line producer, production manager, and individual cast and crew members. They’ll also look at whether the film can be “bonded.”
Analyzation
Analysis will determine whether past projects have remained on schedule and within budget. They’ll also look at the responsibilities of cast and crew in regards to their past projects.
Additionally, the completion guarantor will analyze production reporting. As well as cash flow and cost reporting. As part of their decision as to the risk assessment of the project.
They want to be sure that they are working with people that have the appropriate background, skills and experience to ensure the project is completed on-time and on-budget since the completion guarantor will have the burden of financial liability should the project go over budget.
The Takeaway
Finally, in examining the answer to your question, “How much do I have to pay upfront for film completion bond?”
The rule of thumb is that you’ll pay between 3% and 5% of the total bond allowance upfront. Because of the upfront expense, these bonds are reserved for mid- to high-budget productions.
