Completion Bond

AAA

DEFINITION of 'Completion Bond'

A financial contract that insures a given project will be completed even if the producer runs out of money, or any measure of financial or other impediment occurs during the production of the project. Completion bonds are used in many industries, including major films and construction projects.

They may be part of a mortgage financing deal, and serve to protect both the mortgagor and mortgagee. A third party financier, a completion guarantor company, is typically brought in to provide the financial backstop in the event that original financing is insufficient to complete the project. Also known as a completion guarantee.

INVESTOPEDIA EXPLAINS 'Completion Bond'

Completion bonds are often standard pre-project material for any large construction project or complex project involving large sums of money and/or multiple investors. They are a longstanding tradition in the entertainment business, where many variables can come into play which may affect the completion of a large movie project.

A third party guarantor will assess the risk to the projects completion and collect a premium for insuring the particular risks to a given project being completed on time, and on budget. Investors become much more likely to get involved, knowing that the project will be completed enough to be sold so they can recoup their investment.

RELATED TERMS
  1. Maintenance Bond

    A type of surety bond purchased by a contractor that protects ...
  2. Construction Bond

    A type of surety bond used by investors in construction projects ...
  3. Guarantor

    A person who guarantees to pay for someone else's debt if he ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Insurance

    A contract (policy) in which an individual or entity receives ...
  6. Surety

    The guarantee of the debts of one party by another. A surety ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Taxes

    Deducting Disaster: Casualty And Theft Losses

    If you've been a victim, your losses may be deductible. Find out how.
  2. Home & Auto

    The Importance Of Property Insurance

    Property insurance is important, but there's a lot you need to learn in order to get the proper coverage.
  3. Options & Futures

    For Top-Notch Insurance Coverage, Compare Quotes

    Find out how to use and compare policy options to get the best coverage at the best price.
  4. Investing

    Will Clean Energy Fuels Create A Better Network?

    Ever since the most recent U.S. energy boom began, many people have looked for ways to take advantage of cheap natural gas from shale gas areas.
  5. Investing

    Is There An Upside For Isis Pharmaceutical Shares?

    Shareholders in biotechnology company Isis Pharmaceuticals have endured a wild, but ultimately enjoyable, ride since late 2012.
  6. Investing

    What Are The Prospects For Plug’s Technology?

    Plug Power's fuel-cell technology has huge promise, but it hasn't paid off yet. Few stocks have seen the volatility that it has experienced during the past
  7. Investing

    Will Intuitive Surgical Shares Benefit Investors?

    Earlier this month, Intuitive Surgical authorized to repurchase up to $1 billion of its common stock. But will it actually benefit investors?
  8. Investing

    Is Caterpillar Here To Stay?

    Because Caterpillar is the largest construction and mining equipment manufacturer in the world, investors can count on it to keep paying dividends.
  9. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  10. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 12000 set up special trading opportunities that take advantage of shifting crowd psychology.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center