Update: This article was originally published on January 15, 2021. It has been updated to reference additional guidance released by the Small Business Administration (SBA) through April 23, 2021
- The grant program opened its application portal at sba.gov on April 26.
- Grants are based on 45% of 2019 gross earned revenue and max out at $10 million.
- Grants can be used to pay eligible expenses back to March 1, 2020.
- Grants are not included in federal taxable income, but are subject to single audit guidelines and potentially an external audit if they total more than $750,000 in any single year.
Need help navigating the new grant program?
The Consolidated Appropriations Act and The American Rescue Plan funded a new $16 billion grant program designed to provide financial assistance to shuttered venue operators (SVOs). These grants offer relief in the form of cash grants to live venue operators, movie theaters, and museums that have struggled due to COVID-19.
Importantly, SVO grants substantially differ from the Paycheck Protection Program (PPP) by offering grants of up to $10 million to eligible organizations, rather than the PPP’s loan and forgiveness structure. In fact, any PPP loans issued after December 27, 2020, reduce the amount of the SVO grant awarded. If you still intend on applying for a PPP loan, you must do that before applying for an SVO grant.
Am I eligible for an SVO grant?
An entity or individual may be eligible for an SVO grant if they are a talent representative, movie theatre, relevant museum, live venue operator or promoter, theatrical producer, or live performing arts organization operator. Thankfully, these categories are specifically defined to help us determine whether an organization or individual fits each category.
Live venue operators or promotors, theatrical producers or live performing arts organization operators may be organized as for-profit, nonprofit, or government-owned entities; 70% or more of the earned revenue of the business must be generated by an eligible live event. A theatrical producer may also be eligible if, as its principal business activity, it makes production tickets available for public purchase on average not less than 60 days in advance of the performance date.
Relevant museum operators are eligible if they operate a public, tribal, or private nonprofit organization or institution organized on a permanent basis for education, cultural heritage, or aesthetic purposes.
Motion picture theatre operators may be organized as a for-profit, nonprofit, or government-owned entity. The principal business activity must be the ownership or operation of at least one place of business with a purpose of showing movies to the public for a fee.
Talent representatives may be for-profit, nonprofit, or government owned. To qualify as a talent representative, it must book or represent musicians, comedians, actors, or similar performing artists primarily at live events, 70% of operations must involve representing or managing artists and entertainers, and performers must be paid based on the number of tickets sold, or a similar basis.
Further eligibility requirements
If a person or entity meets the above categorical requirements, they may be eligible for an SVO grant if they have:
- Been fully operational as of February 29, 2020;
- Experienced a reduction of at least 25% in gross earned revenue during at least one quarter of 2020 compared to the same quarter in 2019; and
- Resumed or intend to resume operations as of the date of the SVO grant.
Potential live venue grant recipients must meet specific venue-specific requirements, which include defined performance spaces; has mixing equipment, a public address system, and a lighting rig; “fair” payment of artists (i.e., not performing for free or tips); marketing of performances; most performances being ticketed (or subject to a cover charge). Venue-specific requirements vary based on category and should be closely examined to determine your eligibility.
As with PPP funding, grantees must make a certification of need as part of the SVO grant application.
Who is not eligible for an SVO grant?
While many persons and entities may seem to qualify for these grants, there are some organizations that are disqualified because they:
- Are majority owned by or controlled by public companies.
- Received (or are majority owned or controlled by another entity that received) more than 10% of its gross revenue from federal funding during 2019 except for government-owned entities.
- Is an entity with all of the following attributes:
- Owns or operates locations in more than one country.
- Owns or operates locations in more than 10 states, and
- Employed more than 500 full-time employees as of February 29, 2020.
- Present live performances or derive more than a “de minimis” gross revenue through the sales of products or services of a prurient sexual nature.
Size of grant awards
The total amount of SVO grants awarded to an individual applicant is limited to $10 million. For entities in operation on January 1, 2019, the amount of the initial grant is equal to 45% of the 2019 gross earned revenue, while those that began operations after January 1, 2019, are limited to six times the average monthly gross revenue for each full month of 2019 that the entity was in operation.
The SBA established a 28-day priority plan, during which time up to 80% of SVO grants may be administered.
- During the first 14 days of the program, awards are prioritized for entities that suffered a 90% or greater gross revenue loss between April 2020, through December 2020, due to the COVID-19 pandemic.
- The grants for the next 14 days are prioritized for entities that suffered a 70% or greater gross revenue loss between April 2020, through December 2020, due to the COVID-19 pandemic.
- After the initial 28-day period has passed, initial grants may be awarded to any eligible entity or person that suffered a 25% or greater earned revenue loss between one quarter of 2019 and the corresponding quarter of 2020.
Any PPP loans received under the CARES Act are not counted toward revenue, and the accrual method of accounting is then used to determine revenue.
The SBA will reserve no less than $2 billion of funding for the first 59 days of the program to provide grants to organizations with 50 or fewer full-time employees (defined as one working at least 30 hours per week, while anyone working 10 – 30 hours per week is counted as 0.5 toward the total number of employees).
Uses of SVO grant funds
SVO grant funding may be used for any of the following:
- Salary, wages, commissions, or similar compensation, capped at an annualized amount of $100,000 per employee (similar to PPP limitations), including vacation, parental, family, medical, and sick leave.
- Payments due to separation or dismissal.
- Health, life, disability, vison, or dental insurance.
- Retirement plan benefit payments.
- State or local tax assessed on compensation of employees.
- Payments to a sole proprietor or independent contractor (a wage, commission, income, net earnings from self-employment, or similar compensation, capped at an annualized limit of $100,000).
- Rent (for a lease in effect before February 15, 2020).
- Utility payments including electricity, gas, water, transportation, telephone, or internet (for service agreements that began before February 15, 2020).
- Worker protection expenditures.
- Principal and interest payments on mortgages/debts (incurred before February 15, 2020).
- Other ordinary and necessary business expenses including: maintenance expenses; administrative costs; state and local taxes and fees; operating leases in effect before February 15, 2020; insurance payments; and advertising, production, transportation, and capital expenditures related to producing a theatrical or live performing arts production, concert, exhibition, or comedy show (though the grant cannot be used primarily for production-related expenses).
- Eligible expenses back to March 1, 2020.
Some prohibited expenses from an SVO grant include:
- Costs unallowable under the Uniform Guidance cost principles
- Political contributions
- Real estate purchases
- Any principal or interest payments on loans obtained after February 15, 2020
Initial SVO grants must be used for costs incurred between March 1, 2020, and December 31, 2021, with any supplemental grant funds used for costs through June 30, 2022. Initial grant funds not spent within one year (and supplemental grant funds not spent within 18 months) of disbursement must be returned to the Small Business Administration.
On April 23, 2021, the SBA released SVO grant-specific FAQs, an SVO grant application checklist, an SVO grant applicant user guide as well as an SVO grant-specific version of IRS Form 4506-T to assist applicants in determining eligibility and completing the grant application.
How we can help
If your organization needs our support — especially if its revenue has fallen off drastically — now is the time to take advantage of this opportunity. CLA is here to help you navigate grant compliance and the complex rules in determining eligibility for this competitive federal grant program.