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The Consolidated Appropriations Act, 2021 established the Shuttered Venue Operators (SVO) Grant Program. The SVO grant program was further revised by the American Rescue Plan Act, which was signed into law on March 11, 2021. This article will update my earlier discussion of the SVO grant program and reflects subsequent announcements made by SBA. The shuttered venue operators grant program authorizes up to $15 billion in grants to eligible entities. The Small Business Administration, or SBA 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.
Recent Changes
The latest SBA guidance announced several important changes from previous guidance. I’ll summarize them here, and discuss them in more detail below:
- On March 21, 2021, SBA launched its SVO Grant Portal. If you are interested in SVO grants, I encourage you to bookmark that page and check it often. There is a link to sign-up to be informed when the application process opens.
- Also, on March 21 SBA announced that it will begin accepting applications for SVO grants on April 8, 2021.
- Previously, an entity was prohibited from receiving both a SVO grant and a paycheck protection program (PPP) loan. This is no longer the case:
- If an entity applied and was approved for a PPP loan prior to December 27, 2020, it is eligible to apply for an SVO grant.
- If an entity has applied for a first draw or second draw PPP loan on or after December 27, 2020, it is now eligible to also apply for an SVO grant. If the SVO grant is approved, however, it will be reduced by the amount of the PPP loan.
- If an entity receives an SVO grant, it is not eligible to subsequently apply for a PPP loan.
Guidance
The SBA is in the process of setting up the grant program and will begin accepting applications on April 8, 2021. The most recent guidance from SBA, released in the form of frequently asked questions, was issued on March 12, 2021.
As noted above, if you are interested in the SVO grant program, you should visit the SBA’s portal.
SBA also released a Preliminary Application Checklist on March 5, 2021. SBA said that the SVO grant application process is still under development and the list is subject to further refinement.
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 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:
- 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.
- 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.
- Review and gather the required documentation to support your (eventual) application. I’ve summarized the requirements below, but you should also refer to the official SBA guidance if you have any questions.
- Stay up to date by frequently visiting www.sba.gov/svogrant or this website as guidance is updated and the application process is opened.
- Consider subscribing to updates from this website. It is free. You will not receive unsolicited marketing emails, and I will never sell or share your email address with anyone.
Eligible Entities
- The business must have been in operation as of February 29, 2020
- Gross earned revenue in any calendar quarter in 2020 must have declined at least 25% compared to the corresponding quarter in 2019.
- Eligible Entities include:
- live venue operators or promoters
- theatrical producers
- live performance arts organization operators
- museum operators
- motion picture theater operators
- talent representatives
For more details, see the recently released Eligibility Requirements guidance from SBA.
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
Required Documentation
All Applicants
Background documents
- Written statement of need and assurance
- Required by statute and must include:
- A good faith certification that the uncertainty of current economic conditions makes the grant necessary to support the ongoing operations of the eligible person or entity.
- If the entity is currently in operation, must state that the entity will remain in operation after receipt of the funds.
- If the entity is shuttered, the statement shall include the intent to reopen with an estimated reopening date.
- All statements shall include an assurance that the entity was fully operational on February 29, 2020, and that the funds will only be used for the allowable purposes.
- Required by statute and must include:
- .Corporate Documents
- May include Articles of Incorporation, Certificate of Existence, Certificate of Organization, State LLC Agreement, Certificate of Formulation or Articles of Information.
- Government issued photo ID – front and back
- A copy of a photo ID. This could be a state driver’s license, passport book, passport card, US military or military dependent ID, US permanent resident card, etc.
- Employee list with job titles and employee status (full or part-time)
- A complete listing of all who work for the entity at the time of application. This is separate from the official payroll record. Each employee must include:
- Complete name
- Description of employee*:
- Status:
- full-time
- part-time
- temporary
- employee agency
- leasing concern
- union agreement
- co-employed pursuant to a professional employer organization agreement
- salaried
- included in payroll
- not included in payroll
- owner, officer or shared with affiliate.
- Status:
- Number of hours employee works per month
- A complete listing of all who work for the entity at the time of application. This is separate from the official payroll record. Each employee must include:
- Tax exempt status letter
- only required for non-profit entities
- also known as an IRS determination letter.
The description of employee requirement can be tricky, some individuals may require multiple designations in the description. Some examples given by SBA: “Jane Smith – owner, salaried, included in payroll” and “Joe Smith, owner, not included in payroll, shared with affiliate.”
Financial documents
- 2019 Tax Return
- If in operation for any portion of 2019, provide a copy of the entity’s 2019 tax return.
- 2020 Tax Return, if filed
- If not already filed, provide to SBA when filed with the IRS.
- Quarterly Income Statements for 2019 and 2020
- Must demonstrate all sources of revenue and expenditures.
- If not in business for all of 2019, include statements for the quarters it was in operation.
- Copy of most recently Audited Financial Statement (2019) or Single Audit (if applicable) or link to website where the report can be located
- Unofficial guidance is that this is required for grants of $750,000 or more.
- If the period audited is older than six months, include interim Income Statement and Balance Sheet (certified by an officer of the organization).
- Indirect cost rate agreement with cognizant agency (if applicable)
- Attach current indirect cost rate agreement, if one is in place.
- May negotiate a proposed rate to be negotiated.
- If negotiated cost rate agreement was never in place, a 10% de minimus rate.
- Payroll statements covering the pay period including February 29, 2020.
Standard Forms
- SF-424B – Assurances for Non-Construction Programs.
- Certifies the entity will comply with all applicable requirements of the federal laws, executive orders, regulations and policies governing the grant program.
- SBA Form 480 – Size Status Declaration
- Provides information on the applying entity and any affiliates.
- Certification of Drug-Free Workplace
- SBA Form 1623
- Certification regarding debarment, suspension and other responsibility matters.
- SBA Form 1711
- Certification regarding lobbying and disclosure of lobbying activities.
Applicant-Specific Documents
Live venue operator or promoter, theatrical producer, or live performance arts organization operator
- Floor plan (and plan of grounds if outdoor space is used for the performance venue)
- Provide the floor plan used for insurance purposes or local fire inspections. Floor Plan (and plan of grounds if outdoor space is used for the performance venue) should demonstrate the location of the defined performance space.
- Documents to show that the venue has audio mixing equipment, a public address system, and a lighting rig.
- This can include receipts for purchase or installation, or insurance documents covering the items.
- Marketing materials
- Include copies of print or electronic advertising, paid receipts for advertising, social media pages, etc. that list event or motion picture titles, show times and dates, and ticket price or entry requirement.
- Box office / ticketing report
- Report listing event title, show time, ticket price and number of tickets sold.
- Provide the report for all February 2020 performances.
- If the venue was in operation but had no performances in February 2020, select one month between January 2019 and January 2020.
Motion Picture Theatre Operator
- Floor Plan
- Provide the floor plan used for insurance purposes or local fire inspections. Floor Plan (and plan of grounds if outdoor space is used for the performance venue) should demonstrate the location of the defined performance space. The floor plan should also identify the projection booth.
- Marketing Materials
- Include copies of print or electronic advertising, paid receipts for advertising, social media pages, etc. that list event or motion picture titles, show times and dates, and ticket price or entry requirement.
- Box office / ticketing report
- Report listing event title, show time, ticket price and number of tickets sold.
- Provide the report for all February 2020 performances.
- If the venue was in operation but had no performances in February 2020, select one month between January 2019 and January 2020.
Museum
- Floor Plan
- Provide the floor plan used for insurance purposes or local fire inspections. Floor Plan (and plan of grounds if outdoor space is used for the performance venue) should demonstrate the location of the defined performance space. The floor plan should also identify the projection booth if a movie theatre is part of the facility.
- State or local COVID occupancy restrictions demonstrating limits on occupancy
- A copy of state or local ordinances that demonstrate the limitation on occupancy that affected the museum.
Talent Representative
- Examples of Contractual/Consultant Agreements
- Examples of contractual/consultant agreements with talent represented and venues used and evidence of booking. Not all contractual agreements will be needed but you may need to provide them as evidence for disbursements.
- List of all individuals or acts represented
- Cross walk listing for all individuals or acts represented and venues for which they were contracted to perform. This list should include all talent represented in 2019 and 2020, the venues for which they were contracted to perform and the performance dates. Note if the performance was canceled due to COVID.
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.