Category: 

What is a Completion Bond?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
A recent study suggests that former acne sufferers are more likely to retain a youthful appearance as they age.  more...

December 9 ,  1979 :  The eradication of smallpox was certified.  more...

The completion bond is an important financial device that helps to ensure that projects of all sorts are completed even in the event that the owner or borrower runs out of available funds. Completion bonds are common financial tools in a number of different investment and financial ventures, ranging from mortgages for major building projects to the production of major motion pictures.

A completion bond is a fairly common tool when it comes to securing a mortgage for a major building project. As part of the loan agreement for the financing, both the mortgagor and the mortgagee are protected in the event of financial reversals. The bond will make sure that the building will be finished to a point that the asset can be sold and at least the investment amount recouped from the venture. Within the perimeters of this application, a completion bond means there is no partially erected shell of a building left standing with no prospects of completion, and no one left with ownership of property that has little or no value.

Ad

The completion bond is well known in the world of entertainment. Because of the enormous cost associated with producing a major motion picture, a completion bond helps investors to be assured that even in the event of some unforeseen circumstance, there will be resources available to complete filming, editing and the eventual release of the production. In the past, completion bonds have come into play when important cast members were replaced due to death or illness, when film sets were destroyed and had to be rebuilt, and a number of other catastrophes that could shut down the entire project.

Essentially, a completion bond works to prevent two events from taking place. First, the completion bond ensures that investors will not lose the funds they loaned or invested into a project because the project ran out of money and could not be completed. Second, a completion loan protects the instigator of the project from circumstances that could not have been reasonably anticipated. Thus, the completion bond is often a desirable financial instrument for both creators and investors.

Ad

You might also Like

Recommended

Discuss this Article

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email