Shuttered Venue Operators Grant Program

Estimated reading time: 6 minutes

Shuttered venues, such as theaters and museums are ineligible for loans under the paycheck protection programs, or PPP. Instead, the stimulus act established the Shuttered Venue Operators (SVO) Grant program. The SVO program includes $15 billion in grants to shuttered venues. The Small Business Administration will administer the SVO grant program.

Eligible applicants may qualify for SVO grants equal to 45% of their gross earned revenue, with a maximum single grant of $10 million. $2 billion is reserved for eligible applicants with up to 50 full-time employees.

The SBA is in the process of setting up the grant program and is not yet accepting applications. However, SBA issued guidance in the form of frequently asked questions on January 27, 2021. I’ll summarize it below, but you should read the document if you think the program applies to your business.

On February 18, 2021, SBA released a video webinar explaining how to register in the System for Award Management (SAM). As explained below, registration in SAM is required to apply for a SVO grant.

For more information about the PPP, see my recent article, PPP Loans: The Sequel is Better!. Note that this blog post will not be updated as circumstances change. For up-to-date information about the SVO grant program, the PPP and the Employee Retention Credit see my Guide to Recovery Resources.

This article is general in nature, and is not intended to provide specific advice to you or your business. You should consult with your financial and legal advisors. However, I’m happy to answer questions. Please contact me if I can be of assistance.

What you should do now

As the SBA works on building the application platform, there are some things you can do to prepare to apply:

1. Register for a Dun & Bradstreet number (DUNS). A DUNS number is necessary to apply. If you do not have a DUNS number, you can apply by clicking the link. The site indicates a number can be issued within one business day.
2. All applicants must register in the System for Award Management (SAM). The SBA encourages you to obtain your DUNS number as soon as possible and register in SAM. You cannot use an individual Taxpayer identification number, an Employer identification number or other means of identification. The SAM registration process may take up to two weeks once submitted.
3. Gather documents that demonstrate your number of employees and monthly revenues so you can calculate the average number of qualifying employees you had over the prior 12 months.
4. Determine the extent of gross earned revenue loss you experienced between 2019 and 2020. Firms not in operation in 2019 may qualify for an SOV grant if their gross earned revenues for the second, third or fourth quarter of 2020 demonstrate a reduction of not less than 25% from their gross earned revenue from the first quarter of 2020.
5. Other information such as floor plans, contract copies and other evidence will be needed to apply for an SOV grant.
6. Stay up to date by frequently visiting www.sba.gov/coronavirusrelief or this website as guidance is updated and the application process is opened.

Eligible Entities

• The business must have been in operation as of February 29, 2020
• Eligible Entities include:
  • live venue operators or promoters
  • theatrical producers
  • live performance arts organization operators
  • museum operators
  • motion picture theater operators
  • talent representatives

Ineligible Entities

An otherwise eligible entity would become ineligible for SVO grants under the following types of circumstances:

• It does not have a place of business located in the United States, does not operate primarily within the U.S., and does not make a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.
• The firm was not in operation as of February 29, 2020
• The company received a PPP loan (first draw or second draw) on or after December 27, 2020
• It is a publicly traded corporation, or is majority owned and controlled by a publicly traded corporation
• It presents live performances or sells products or services of a prurient sexual nature
• More than 10% of its 2019 gross revenue came from the federal government (not counting disaster assistance)
• It owns or operates venues, theaters, museums or talent agencies in more than one country
• It owns or operates venues, theaters, museums or talent agencies in more then ten states AND it had more than 500 employees as of February 29, 2020

Allowable Use of Funds

Funds may be used for specific expenses, which include:

• Payroll costs
• Rent payments
• Utility payments
• Scheduled mortgage payments (not including prepayment of principal)
• Scheduled debt payments on any indebtedness incurred in the ordinary course of business prior to February 15, 2020. Similar to mortgage payments, prepayment of principal is not an allowable use of funds.
• Worker protection expenditures
• Payments to independent contractors (not to exceed $100,000 in annual compensation per contractor)
• Other ordinary and necessary business expenses, including maintenance costs
• Administrative costs (including fees and licensing)
• State and local taxes and fees
• Operating leases in effect as of February 15, 2020
• Insurance payments
• Advertising, production transportation and capital expenditures related to producing a theatrical or live performing arts production. (May not be the primary use of funds)

Funds may not be used to:

• Buy real estate
• Make payments on loans that originated after February 15, 2020
• Investments or loans
• Contributions or other payments to, or on behalf of, political parties, political committees or candidates for election
• Any other use prohibited by the SBA Administrator

SVO Grants vs PPP Loans

The SVO Grant program is intended specifically for eligible entities listed above. However, if a business received a PPP loan under the CARES act prior to December 27, 2020, it is eligible to apply for an SVO Grant. Businesses cannot apply for a SVO Grant and a PPP loan (either first draw or second draw) on or after December 27, 2020.

The SBA guidance indicates that entities cannot apply for a PPP loan and SVO grant at the same time. Entities must make an informed business decision as to which program will most benefit them. If, however, an entity is rejected by one program, it will then be eligible to apply for the other. Remember, the deadline to apply for PPP loans is March 31, 2021. Guidance does not specify a closing date for SVO grants as of the date of this article. Check back often as guidance is updated.

Some Terms Defined:

Gross earned revenue

SBA has indicated that gross earned revenue would only include receipts from the sale of goods or services. Other sources of funds that an organization may receive, such as donations, sponsorships, government assistance or returns on investments are not included in gross earned revenue.

The treatment of fundraising event receipts and non-profit memberships is similar to how they are treated for tax purposes. The portion of the amount which represents the estimated value of the good or service received is considered earned gross revenue. The amount paid that exceeds the estimated value of the good or service would be a donation, however, and is excluded from earned gross revenue.

For example, a ticket to a fundraising dinner costs $100 per person and the estimated value of the dinner is $60 then $60 of the funds would be considered earned gross revenue and the remaining $40 would be a donation.

Employee Count Explained

Employees that work at least 30 hours per week are considered full-time. Someone who works between 10 and 29 hours per week is considered to be one-half of a full-time employee. Anyone who works less than 10 hours per week is not considered an employee.

Average monthly employee count is calculated by summing the number of full-time equivalent employees in each month and dividing by the number of months.