Late last year, Congress authorized funding including $15 billion in grants through the Shuttered Venue Operators (SVO) Grant Program to provide assistance to businesses or specified representatives involved in performance, entertainment and museum arts. The funding was approved as part of the Consolidated Appropriations Act of 2021 and will be administered through the Small Business Administration (SBA), which as of January 20, 2021 is not yet accepting applications for the grant Program. Applicants will be required to submit a good-faith certification that the uncertainty of current economic conditions makes the grant necessary to support their ongoing operations.
Those businesses and representatives eligible to receive SVO grants are talent representatives (including agents or managers that primarily represent or book performers (i.e., no fewer than 70% of their bookings are at live events); theatrical producers; live performing arts organization operations; live venue operators and promoters; museum operators, zoos and aquariums and businesses owned by an eligible business. Eligible businesses/representatives must also meet the criteria set forth below to be able to receive a Program grant:
- Was in full operation on February 29, 2020;
- Had a 25% gross earned revenue decline in any 2020 quarter compared with the same quarter in 2019;
- Is open or intends to reopen as of the date the grant is received;
- Is not owned or controlled by an entity that is publicly traded or received more than 10% of its gross revenue from federal funding during 2019; and
- Has not received a Paycheck Protection Program loan after December 27, 2020.
Who is Not Eligible for the Grant?
Not all talent representatives, theatrical producers, live venue operators or performers, motion picture theatre operators, museum operators, or live performing arts organization operators are eligible to receive a Program grant. The following are excluded from the grant Program and prohibited from receiving a grant:
- Businesses that present live performances that are of a prurient sexual nature; or
- Businesses where more than a de minimis portion of its gross revenue is derived by sales of services or productions that depict or display of a prurient sexual nature.
When Will the Grants be Awarded?
The grants will be awarded on a priority basis and the time frame of receipt will be directly connected to priority level. Priority levels will be in waves of 14-day periods. During the first 14-day period, the SBA will award grants to First Priority recipients. First Priority recipients will be those businesses that have endured a loss (as compared to 2019) in revenue of 90% or more between April 1st and December 31, 2020. Immediately following the initial 14-day period will be a subsequent 14-day period during which the SBA will award grants to the Second Priority recipients. Second Priority recipients will be those businesses that have endured a loss (as compared to 2019) in revenue of 70% or more between April 1st and December 31, 2020. Finally, after the first two priority waves, grants shall be awarded to all other eligible businesses.
What will the amount of the Grant Be?
For businesses in operation on January 1, 2019, grants will be awarded in an amount equal to the lesser of 45% of the gross earned revenue by the business during 2019, or $10,000,000. For businesses that began operation after January 1, 2019, the grant amount will equal the lesser of the average monthly gross earned revenue for each full month during which the business was in operation during 2019 multiplied by 6, or $10,000,000.
Will there be additional Grant Funds?
There is supplemental funding available for the First Priority and Second Priority recipients that have had a revenue loss of 70% or greater as of April 1, 2021. The supplemental funding will be available after the First Priority and the Second Priority awards are distributed.
Are there Program Limitations or support to smaller venues?
Two noted limitations of the Program are:
- An eligible person or entity cannot receive a grant for more than 5 of their business entities.
- At least $2,000,000,000 of the total amount of grants that are made available shall be awarded to businesses that employ up to fifty (50) full-time employees. A full-time employee shall mean an employee who works no less than thirty (30) hours each week. Employees who work no less than ten (10) hours and no less than thirty (30) hour each week will be counted as 1/2 of a full-time employee.
What Expenses Can be Covered by the Grant?
Grant funds may be used towards the following expenses, so long as those expenses were incurred between March 1, 2020 and December 31, 2021:
- Rent obligations.
- Payments of interest or principal on any indebtedness in place before February 15, 2020.
- Payroll costs.
- Payments to independent contractors not to exceed $100,000 annually.
- Utility payments.
- Covered worker protection expenditures.
- Ordinary and necessary business expenses, such as administrative costs, payments required for insurance on any insurance policy, state and local taxes and fees, and maintenance expenses.
What Expenses are Prohibited?
Businesses cannot use the grant to invest or re-lend funds; purchase real estate; towards payments of interest or principal in connection with loans that were effective after February 15, 2020; contributions or expenditures to or on behalf of a candidate for elective office, a political party or party committee; or for uses that the SBA prohibits.
Currently, the SBA is setting up the Program and has not started to accept applications. We recommend performance venues and/or agents review the eligibility criteria to determine if they are eligible. If you are unsure on eligibility, business owners or agents should seek counsel to review business information to determine eligibility. Potential applicants should start to gather the necessary accounting information (and work with their accountants) to be in a position to apply for a grant once the SBA opens the Program and begins to accept applications.
Finally, because a business is ineligible to receive both a Second Draw PPP loan and a Program grant, businesses need to determine now which relief program (PPP or the SVO Grant Program) they want to pursue. With the roll out of the SVO Grant Program being later than the Second Draw PPP program, businesses may want to apply for (but not accept) a Second Draw PPP loan (to preserve the ability to obtain relief), and also apply for an SVO grant. Any business that applies for both programs would need to ensure they withdraw the Second Draw PPP application prior to acceptance of any loan to be eligible to receive an SVO grant.