In an effort to rescue an industry in danger of being wiped out because of recent changes in the tax laws, the Small Business Administration is about to enter the field of motion picture financing.
The SBA is expected to announce a pilot program Friday designed to finance efforts by small independent film makers by loaning money to selected investment companies.
The three-year test is designed to help the SBA ressolve certain "policy issues," associated with the venture. And there are restrictions to keep the government out of the pornography field.
The policy issues include the actual impact the SBA could have on the "development of independent small business participation in the field of movie production and distribution; [and] the validity of employing government leverage funds in a specialized field of endeaver generally considered to have high-risk attributes," among others.
The SBA action comes after about two years of requests for such aid from several venture capital firms who want to invest in small independent film productions.
Attorney Anthony Chase, a former deputy administrator and general counsel at the SBA, represented about a dozen such firms in their dealings with the agency. "At least $30 to $40 million should be made available in the first year of this program," Chase said.
The plan calls for the SBA to provide $3 in loans to various investors for every dollar put up by an investor.
There is also a $35 million limit on how much any one investment firm can borrow.
And, there are certain restrictions on the type of films that can be produced with the federal funding. According to the proposed rules, no X-rated films can be made under SBA financing, nor can films of a "political or religious nature." Documentaries, travel, and feature films will be the types of movies likely to be financed.
The Tax Reform Act of 1976 ended large tax write-offs previously associated with film production, thus drying up much of the outside financing for independent film makers. Most of that financing came from people looking for deductions.