On December 27, 2020 funding for the Shuttered Venue Operators Grant (SVOG) program (Program) was signed into law with the Consolidated Appropriations Act of 2021 (CAA). You can find a summary of the Program here. The U.S. Small Business Administration (SBA) has since provided answers to frequently asked questions regarding the Program. Below are brief summaries of the FAQs to assist potential applicants in considering the Program and preparing to file, if eligible.
Please note, currently the SBA has yet to open the Program to take applications/submittals. The FAQs have been issued in anticipation of opening of the SBA portal to accept applications.
The Program and PPP Loans. Can an Entity Receive Both?
Only those borrowers/entities that applied for a First Draw PPP loan before December 27, 2020 may currently apply for the Program. In the event an entity applied for either a First Draw or Second Draw PPP loan after December 27, 2020, the entity would be prohibited from applying for a Program grant until the PPP loan is declined. Additionally, entities cannot apply for a PPP loan (after December 27, 2020) and a Program grant at the same time. Entities must make an informed business decision as to which program will most benefit them and apply accordingly. Only if an applicant is rejected by one program may it then be eligible to apply for the other program.
Venues and Fixed Seating Eligibility
Indoor and outdoor venues that have fixed seating (seating that is permanently fixed to the floor) are eligible. Venues that have convertible, temporary or non-fixed seating arrangements are not eligible. A motion picture theatre operator must have at least one auditorium with a motion picture screen and fixed audience seating to be eligible so a drive in movie theater would not be eligible.
Live Venues Eligibility
In addition to entities that meet the eligibility classifications initially set forth in the CAA, which can be found here, the FAQs expressly state the following live venue operators and promotors are eligible to apply for assistance:
- Performing arts center owned and operated by a government or state college (as a college department).
- Dinner theaters are eligible if the principal business activity is any of the following: organization, promotion, management or the hosting of theatrical productions or other events by performing artists, live concerts, or comedy shows.
The FAQs also state the following live venue operators and promotors are not eligible to apply for the Program:
- Since wedding venues do not have a defined audience and performing space, no sale of tickets or promotion of events to the public, no employment of stage managers or box office managers or employment of sound engineers, they are not likely to meet the requirements of eligibility to apply.
- Restaurants whose principal line of business is restaurant operation.
- Sports stadiums or similar athletic arenas since the principal business activity is not the organization, promotion, management or hosting of live concerts, comedy shows, theatrical productions or other events by performing artists.
The FAQs provide additional clarification on how the award grants can be used by their recipients. Specifically, during the pandemic, many concerts and events have been cancelled. This Program allows for SVOG funds to be used to refund customers for cancelled shows. The funds may also be used to reimburse an owner who loaned the business money to pay operating expenses and retain employees, so long as the loan was incurred prior to February 15, 2020, was made on commercially reasonable terms and was documented.
How Are Full-time Employees Calculated?
If an entity owns or operates venues, theaters, museums, or talent agencies in more than one country; owns or operates venues, theaters, museums, or talent agencies in more than 10 states; AND had more than 500 employees as of February 29, 2020 it is not eligible for the Program. The number of full-times is
- Employees who work at least 30 hours are considered full-time employees.
- Employees that work between 10-29 hours per week are considered one-half of a full-time employee.
- Employees that work less than 10 hours per week are NOT considered an employee.
One criterion for an entity to be eligible for the Program is that the entity must have had a 25% gross earned revenue decline in any 2020 quarter compared with the same quarter in 2019. The FAQs provide additional clarification on this by defining “earned revenue” and “gross earned revenue”:
- Only monies organizations received from the sale of goods or services are counted as “earned revenue.”
- “Gross earned revenue” means the total revenue from the sales of goods or services (i.e., merchandise, advertising sales and contracted presentation income, admissions tickets, and food and beverages).
- Donations, membership revenue and gratuitous contributions should not be included in the gross earned revenue calculation, but the portion paid in connection with a fundraising event for the value the good or service received in exchange must be included in gross earned revenue.
- Rental income for event hosting can be included in earned revenue.
- Both contributions and grant revenue are excluded from earned revenue.
A parent entity may apply for itself and subsidiary entities (up to 5) and the parties will share expenses, under the grant, across organizations. If a subsidiary would like to apply for the Program separate from the parent, the subsidiary must separately meet the Program application criteria and the subsidiary may only apply for that portion of shared costs that the subsidiary pays directly.
Next Steps: What Entities Can Do to Prepare for the Program to Open?
Entities considering applying for a Program grant can:
- Seek legal counsel if you are unsure if you are eligible to apply for a Program grant.
- Register for a Dun and Bradstreet number (DUNS), which is a prerequisite to file an application with the SBA’s application platform, the System for Award Management (SAM.gov). Entities will not be able to use their TIN, EIN or other identification number to register with SAM.gov. The FAQs state that when able to apply through SAM.gov, registration may take up to two weeks once submitted.
- Gather applicable documents related to contract copies, floor plans, the number of employees and monthly revenue and determine the extent of gross revenue loss experienced between 2019 and 2020.