SBA Posts Guidance for Shuttered Venue Operators Grants

The Consolidated Appropriations Act, 2021 signed into law by President Trump on December 27, 2020, includes the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), which provides $15 billion in funding for the U.S Small Business Administration (SBA) to establish a new Shuttered Venue Operators Grant (SVOG) program for eligible live venue operators, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators and talent representatives, to address the economic effects of the COVID-19 pandemic on live venues. The Paycheck Protection Program (PPP) and other economic relief programs have not worked for live event venues, which are mostly shuttered and depend on gatherings of large groups of people to generate revenue and support their employees. Eligible applicants may qualify for a SVOG equal to 45% of their gross earned revenue, with the maximum amount available for a single grant award of $10 million.

The SBA is still in the process of setting up the SVOG program and is not yet accepting applications as of February 4, 2021. However, eligible applicants should review the program details on the special webpage posted on the sba.gov website. In addition, the SBA has issued the following publication – Shuttered Venue Operators Grants Frequently Asked Questions (February 12, 2021) – to answer FAQs about the program. These FAQs will be updated as new information comes available and additional program details are finalized.

Eligible applicants

Eligible applicants must have been in operation as of February 29, 2020 and they cannot apply for or receive a First or Second Draw PPP Loan on or after December 27, 2020. Applicants who received a PPP loan prior to December 27 are still eligible to receive a SVOG.

Eligible applicants include the following persons or entities:

• Live venue operators or promoters;
• Theatrical producers;
• Live performing arts organization operators;
• Relevant museum operators, zoos and aquariums who meet specific criteria;
• Motion picture theater operators, and;
• Talent representatives.

See Section 324 of the Economic Aid Act for definitions of eligible applicants

Entities of these types owned by state or local governments (for example, museums or historic homes) are eligible to apply for an SVOG if the governmentally-owned entity also acts solely as a venue operator, museum, etc. and does not include other types of entities.

For entities with multiple subsidiaries, the parent entity must meet the eligibility criteria, but each subsidiary does need to meet the criteria independently. If a subsidiary wants to apply for its own SVOG in its own name, it must meet the eligibility requirements. Each entity is looked at independently if it’s a separate legal entity under a parent organization and each location would need to meet its individual requirements to be eligible to apply. A maximum of five business entities of an eligible entity can receive an SVOG.

Entities cannot apply for a PPP loan and SVOG at the same time. Entities must make an informed business decision as to which program will most benefit them and apply accordingly. If an applicant is rejected by one program, it will then be eligible to apply for the other.

Ineligible Applicants

The following circumstances would disqualify an otherwise eligible entity from being considered for an SVOG:

• 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;
• It was not in operation as of Feb. 29, 2020;
• It received a PPP loan on or after Dec. 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), and;
• It 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 ten states AND it had more than 500 employees as of Feb. 29, 2020.

Grant awards

Awards will be granted as follows:

• An eligible applicant that was in operation on January 1, 2019, will be awarded the lesser of an amount equal to 45% of their 2019 gross earned revenue or $10 million;
• An eligible applicant who began operation after January 1, 2019, will be awarded the lesser of the average monthly gross revenue for each full month they were in operation during 2019 multiplied by 6 or $10 million.

The maximum amount of a single grant award is $10 million. (includes initial and supplemental funding)

The SBA is defining earned revenue and gross earned revenue (the two terms referred to in the Economic Aid Act) in accordance with common principals of the accrual method of accounting. Using this, only monies organizations receive from the sale of goods or services are counted as earned revenue. This commonly accepted definition of earned revenue does not include other sources of funds that an organization may receive, such as donations, sponsorships, governmental assistance or returns on investments.

Gross earned revenue is the total of earned revenue from various sales of goods or services, such as admission tickets, merchandise, food and beverages, advertising sales and contracted presentation income.

Grant applications 

The SBA is in the process of setting up the SVOG program and is not yet accepting applications. As the SBA works on building its application platform, it would be in the SVOG applicant’s best interest to register for a DUNS number so they can then register in the System for Award Management (SAM.gov). Applicants should also gather documents that demonstrate their number of employees and monthly revenues, so they can calculate the average number of qualifying employees they had over the prior 12 months. Lastly, applicants should determine the extent of they gross earned revenue loss they experienced between 2019 and 2020. This data, plus additional information such as floor plans, contracts and other evidence will be needed to apply for an SVOG.

Applicants need to register with the Federal government at SAM.gov to apply for an SVOG and cannot use an Individual Taxpayer Identification Number (ITIN), Employer Identification Number (EIN) or other means of identification or registration. Interested parties are also encouraged to obtain a Dun and Bradstreet (DUNS) number (a prerequisite for SAM registration) as soon as possible. With a DUNS number, interested parties then should immediately begin registering at SAM.gov, as this registration may take up to two weeks once submitted.

Those persons or entities who have suffered the greatest economic loss will be the first applications processed under the following schedule:

First Priority (first 14 days of grant awards)

• Entities that suffered a 90% or greater revenue loss between April – December 2020 due to the COVID-19 pandemic.

Second Priority (next 14 days of grant award)

• Entities that suffered a 70% or greater revenue loss between April – December 2020 due to the COVID-19 pandemic.

Third Priority (beginning 28 days after First & Second priority awards are made)

• Entities that suffered a 25% or greater revenue loss between April – December 2020 due to the COVID-19 pandemic.

Supplemental Funding (available after First & Second priority)

• Recipients of First and Second Priority rounds who suffered a 70% or greater revenue loss for the most recent calendar quarter (as of April 1, 2021 or later)

There is no priority based on number of employees in the application process. Per the Economic Aid Act, there is a $2 billion small employer set-aside for those entities with 50 employees or less.

Allowable use of funds