Independent film producers have long been frustrated by the SAG (and now SAG-AFTRA) requirement that they post a bond with the union at the start of principal photography to cover actors’ payroll. The so-called “SAG bond” – actually a security deposit – can be as much as roughly equal to the total anticipated actor payroll amounts for the film, including union fringe benefits, and the problem for producers is that the amount is simply held in reserve by the union, not paid to the actors. That means that producers have to fork out a similar amount to a payroll company in order to actually pay the actors.
Once the actors are properly paid, the union usually returns the bond amount to the producer, but that may not happen until several months after the end of principal photography. As a result, the producer has to pay the payroll amount in the interim, and then may have difficulty funding for post-production while waiting for return of the bond. The union has a straightforward reason for its procedure – the SAG bond is intended to ensure that actors get paid in full if the producer defaults – but low budget films, perennially tight on funds, may have to struggle with cash flow hiccups while money is tied up in the union trust account.
The DGA and IATSE also can require bonds. Studio pictures don’t face the cash flow problem, because the majors are exempt from the bond requirement, at least at SAG-AFTRA.
A new Internet-based service, BondIt, addresses the issue, by paying the SAG bond on the producer’s behalf, and receiving its money back from the union once the actors have been paid. Of course, there’s a cost to this: the company charges a fee that it says is typically 11.25 percent of the total bond amount. That cost becomes an additional line item in the budget, which makes the film slightly more costly. But it also means that budgeting and cash flow are eased.
I (and my clients) haven't used the service, but I wrote about it for The Hollywood Reporter and interviewed producers who have. They were enthusiastic. Read more here.