Live entertainment venues have been hit hard during the pandemic, with many theaters and performance halls completely closed since last March. As part of the Consolidated Appropriations Act, the Small Business Administration (SBA) has been authorized to issue $16 billion in grants to support struggling venues.
Eligible applicants may qualify for Shuttered Venue Operators (SVO) grants equal to 45% of their gross earned revenue in 2019, with the maximum amount available for a single grant of $10 million.
Applications will be administered through the SBA. SBA is currently building the grant program and expects to open applications in early April.
Eligible entities for the program include:
Live venue operators
Performing arts groups
Nonprofit museums, botanical gardens, historic homes and zoos that meet specific requirements
To be eligible for the program, the entity must have been fully operational on February 29, 2020, and its gross earned revenue during a calendar quarter in 2020 must have decreased by at least 25% from the same quarter in 2019. Upon receiving the grant, the entity has to intend to resume its respective operations if it has not done so already.
Update on Eligibility
A PPP loan recipient may apply for a SVO grant.
If a PPP borrower receives a First Draw or Second Draw PPP Loan after December 27, 2020, the amount of any subsequently approved SVO grant will be reduced by the amount of the First Draw or Second Draw PPP Loan. If a PPP borrower receives both a First Draw and a Second Draw PPP Loan after December 27, 2020, the amount of any subsequently approved SVO grant will be reduced by the combined amount of both PPP loans.
A PPP loan received before December 27, 2020 will not reduce the amount of the SVO grant award.
If a PPP applicant is approved for an SVO grant before SBA issues a loan number for the PPP loan, the applicant is ineligible for the PPP loan, and acceptance of any PPP loan proceeds will be considered unauthorized use.
SVO grant applicants may apply for EIDL, but funds cannot be used for the same purpose/costs as SVO grants.
Entities not eligible for the program include:
Issuers of securities listed on a national securities exchange, or those owned or controlled by an issuer of securities listed on a national securities exchange
Those that received more than 10% of its gross revenue from federal funding in 2019 (certain exclusions apply)
Those with more than two of the following characteristics:
Owns or operates businesses in more than one country
Owns or operates venues or businesses in more than 10 states
Employed more than 500 FTEs as of February 29, 2020
Has received a PPP loan (round 1 or round 2) on or after December 27, 2020
Other business-type requirements may apply
Grant disbursements will be prioritized
During the first 14 days of the program, eligible entities with a year-over-year revenue decrease of 90% or more from April through December 2020 versus 2019 will have first priority. During the next 14 days, eligible entities with a year-over-year revenue decline of 70% from April through December 2020 versus 2019 will have second priority.
Keep in mind that “revenue” for year-over-year comparisons excludes amounts received under the CARES Act (e.g., PPP loans), and first and second priority grants cannot exceed $12 billion, or 80% of total funding.
After the initial 28-day period, eligible entities with one-quarter of year-over-year revenue losses between 25% and 70% may be awarded a grant. SBA affiliate rules do apply; the number of grants for a group is limited to five entities. Also, $2 billion has been set aside for entities with fewer than 50 FTEs.
Grant award amounts
Grants initially issued by the SBA will be the lesser of 45% of an entity’s gross earned revenue in 2019, or $10 million if it was in operation as of January 1, 2019. If the entity was not in operation until after January 1, 2019, the grant would be the lesser of $10 million or the amount equal to the average monthly gross earned revenue for each full month the grantee was in operation during 2019, multiplied by six. Museum operators are limited to $10 million across all museums operated by the operator.
In addition to initial grants, supplemental grants may be awarded. A supplemental grant is available to an entity that received an initial grant and if, by April 1, 2021, its revenues for the most recent calendar quarter are not more than 30 percent of its revenues for the same quarter in 2019 due to the pandemic. The amount for the supplemental grants will equal 50 percent of the initial grant received, and the overall maximum for the total amount awarded, including the initial and supplemental grants, will not be more than $10 million.
What are allowable uses of SVO Grant funds?
Grants may be used for costs incurred during the period March 1 through December 31, 2021 or, if a supplemental grant is awarded, ending on June 30, 2022. Funds must be used or they must be given back to the SBA.
Any non-supplemental grant amounts that are not spent within one year after disbursement must be returned to the SBA or, if a supplemental grant is awarded, 18 months from the date of the initial grant disbursement.
Funds may be used for specific expenses, including payroll, rent, utilities and scheduled mortgage payments or debt payments. They could also be used for covered worker protection expenses, payments made to independent contractors, maintenance expenses, administrative costs, state and local taxes and fees, operating leases (as of February 15, 2020), insurance policies, and advertising, production transportation and capital expenditures relating to producing a live performance or exhibition (this may not the be primary use of funds).
Funds are prohibited to be used for certain expenses, such as the purchase of real estate, payments of interest or principal on loans originated after February 15, 2020, investments or relending funds, contributions to or on behalf of any political party, party committee or candidate for elective office, or any other use as prohibited by the SBA.
What type of documentation will I need to maintain compliance with the program?
Applicants must make a “good-faith certification” that all information to apply is accurate. To demonstrate compliance, the recipient must retain employment records for a four-year period, and all other records for a three-year period after the distribution of funds. The SBA is committed to auditing usage of the funds, but guidelines have yet to be published.
There are many other important details to this legislation. We encourage you to view our videos on this subject or reach out to us at [email protected] if you’d like to start a conversation.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.
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