SBA brings plot twist to new film.

THERE are all kinds of ways to finance movies--banks, multi-millionaires, credit cards, friends and family.

But Geno Taylor and Mychal Wilson came up with a novel approach: the Small Business Administration.

"The Gristle," their low-budget urban comedy caper about L.A. medical assistants who stumble into drug deals and black-market kidneys, will make its debut next month on HBO--courtesy of two SBA loans totaling $350,000.

It's believed to be a first for Hollywood--and Washington.

"Geno and I had no idea what we were getting into," said Wilson. "After a while, even our friends and family told us that we were crazy."

Taylor and Wilson are counting on the TV airing, both on HBO and the Starz Encore Group, to give a boost to video sales and rentals for the film, which has been in video stores since July 31 under a profit-sharing deal with Warner Home Video. That, in turn, will help cover the $350,000 SBA loan, which represents about two-thirds of total production costs. The rest they put up themselves with savings from their day jobs.

"It's done reasonably well but we expect more from it," said Arnie Holland, president and chief executive of New York-based Lightyear Entertainment, which signed a deal with Taylor and Wilson for domestic home video rights. Lightyear, formerly RCA Video Productions, has a distribution pact with Warner Home Video.

"We feel that there is a market for good quality films that haven't found their way to movie screens for one reason or another," Holland said.

Government films

Tales abound of prospective filmmakers struggling against long odds, but the path traveled by Wilson, 36 and Taylor, 39, ranks as especially unlikely.

After meeting in Hawaii a decade ago, Wilson convinced his new friend to join him in acting classes in Los Angeles. At the time, Taylor, a Los Angeles native, owned a couple of beauty supply stores and had made some real estate investments.

"I started chasing dough after college and I took care of my debt," said Taylor, who studied political science at Cal State Northridge. "But I was at a point where I was saying to myself 'What do you want to do with your life?'"

The pair landed roles in a movie written and directed by David Portlock, a former classmate of Wilson's at Lafayette College in Pennsylvania. That film, "The Spartans" was accepted to the 1996 Sundance Film Festival. "We thought, that's it, we've arrived," said Taylor. "We were already writing tickets to our next big feature."

But when they tried to get financing for "The Gristle," another script by Portlock, they had a tougher time. "We didn't say we wanted to make a black film, a white film, an urban film," said Wilson, before Taylor cut in to finish the thought. "The only color that mattered to us was green," he said. "Would the marketplace take the film?"

A friend of Wilson's had applied to the local office of the SBA for a restaurant loan and suggested he give them a call.

The SBA's main function is to guarantee loans made by banks to small businesses and to provide aid in the event of a disaster. Most of the loans are paid back over a period ranging from seven to 25 years, far less than the two to 10 years common in film financing deals. Still, SBA loan guarantees come in a variety of sizes and terms, depending on what the borrower is able to secure.

"This is a very special area and I spent a lot of time trying to find lenders to participate with us," said Rick Kresser, chief of finance for the Los Angeles office of the SBA.

Finding a bank

With "The Gristle" as the guinea pig, the SBA created a pilot program to find financing for minority and women filmmakers. But few banks were willing to get on board.

"The problem for independent films that have a budget of $3 million or less is they don't have a star that can get them pre-sale distribution rights," Kresser said. "You don't know how you are going to get your investment back."

After more than a year, Kresser helped the pair lined up a loan with Valley Bank in Moreno Valley. Later, EastWest Bank made a second loan to cover post-production costs. (A little more than a year after the SBA film program got going, it was cut, leaving "The Gristle" as its only completed project.)

Tim Weaver, now chief financial officer of aircraft parts manufacturer Dukes Inc., was vice president of SBA lending for EastWest when Taylor and Wilson applied for their loan.

"This was our first film and it took a while to learn about the financing," Weaver said. "It was the integrity of (Taylor and Wilson) that sealed the deal. Coupled with the fact that the bank got an SBA guarantee, it was a feasible deal."

Initially, Taylor and Wilson were required to make monthly payments of $3,600 on their 10-year loans, but when the pilot program was enacted it included a provision that allowed them to defer payments until after they obtained distribution.

Even after obtaining the financing, prospects for "The Gristle" were anything but certain.

The filmmakers had counted on their earlier success to get them into Sundance in 2001, but after being all but assured a spot, Taylor said, they were left off the schedule.

"I was devastated," he said: "We were banking on that one thing, because we had no distribution and we knew we needed that to get attention for the film."

Instead, they were forced to make the rounds again, but this time with a finished product. At one point, a production company offered to buy the film for $80,000, which would have meant huge losses. Light-year finally bit last year. That helped propel the video deal with Warner Bros.

Now they are waiting for the other shoe to drop. Besides the cable and satellite airings, Taylor and Wilson will get their first report from Warner Bros. on video sales and rentals next month.

Wilson, who is single, graduated from law school and is awaiting his results from the bar exam he took in July. He plans to open an entertainment law firm with some colleagues that will also dabble in producing movies.

Taylor, who is married and has three young children, still works in the beauty business and has started Billionaire Entertainment Film Corp., a finance and distribution company that currently has two titles in the video market.

As for the SBA loan, they are required to make a balloon payment to pay hack the balance within 24 months. If they are unable to do so, they will be required to go hack to a monthly payment schedule.

"Rick Kresser and (other SBA officials) put a lot of faith in us that Geno and I could get the job done," Taylor said. "As the monies come in, everyone will get paid hack. Everyone is going to make some money from this film."