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Shuttered Venue Operators Grant - Frequently Asked Questions

02.18.2021

The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) permits certain eligible individuals or entities to apply for a grant to help such individuals or entities affected by COVID-19 (“SVO Grant”). The below addresses certain provisions of the Economic Aid Act governing SVO Grants. The below is intended to be a general summary of the provisions. If you have any questions regarding the SVO Grant, please contact the Koley Jessen Banking and Finance team.

What is an SVO Grant?

The SVO Grant program was established by the Economic Aid Act to provide grant funding to operators of live performance venues, museums, movie theatres and talent representatives. The SVO Grant program allocates $15 billion in grant funding and will be administered by the Small Business Administration (“SBA”) through its Office of Disaster Assistance. Eligible individuals and entities will be able to apply for SVO Grant funds if they meet certain financial hardship requirements, venue requirements, and have resumed or plan to resume business, as discussed below.

What to do before applying for an SVO Grant?

It is encouraged that potential applicants determine whether they are eligible for an SVO Grant prior to making an application for a first or second draw loan under the Payroll Protection Program (“PPP Loan”). Individuals or entities that apply for, or receive, a PPP Loan after December 27, 2020 will not be eligible to receive an SVO Grant. The SBA has clarified that an individual or entity will not be eligible to receive an SVO Grant if they apply for a PPP Loan after December 27, 2020 until and unless their application is denied. As discussed below, an eligible individual or entity may qualify for more money under an SVO Grant than such individual or entity would be able to obtain through a PPP Loan.  

When is the SVO Grant available?

As of the date of this FAQ, the SBA expects to open an application portal soon, but no specific date has been announced. In the meantime, entities intending to apply should make sure they have a Data Universal Number System (“DUNS”) number and have the ability to register in the System for Award Management (SAM.gov). An entity may search for their organization’s DUNS number or apply for a DUNS number by visiting the Dun & Bradstreet website. An entity registering for a DUNS number will need to provide information on the entity to include entity name, address, name of the CEO or entity owner, year the entity started, primary type of business and the total number of employees (full and part-time). Entities intending on applying for an SVO Grant are encouraged to immediately register on SAM as it can take up to 12-15 business days after submission before an entity’s registration is active on SAM.

Who is eligible to receive an SVO Grant?

The following types of individuals or entities are eligible to receive an SVO Grant:

  • Live venue operators or promoters, theatrical producers or live performing arts organization operators (“Live Venue Operators”);
  • Relevant museum operators;
  • Motion picture theatre operators; and
  • Talent representatives.

The eligibility requirements for each of the above-listed categories are discussed in greater detail below.

Does an individual or entity need to make a certification that an SVO Grant is necessary?

Yes. Similar to the certification required for PPP Loan applicants, applicants for an SVO Grant must certify that the uncertainty of current economic conditions makes an SVO Grant necessary to support ongoing operations.

What are the requirements for such operators to be eligible for an SVO Grant?

To be eligible, Live Venue Operators, relevant museum operators, motion picture theatre operators, or talent representatives must satisfy the following eligibility requirements:

  • Fully Operational. Such individual or entity must have been fully operational as of February 29, 2020.
  • The SBA has clarified that a business that was “in operation” as of February 29, 2020 is sufficient to satisfy the “fully operational” requirement.
  • Gross Earned Revenue Reduction. Such individual or entity must have had a reduction of at least 25% in gross earned revenue during at least one quarter of 2020 as compared to the corresponding quarter of 2019.
  • If the individual or entity was not in operation in 2019, this test may be satisfied by comparing the first quarter of 2020 with any other quarter of 2020.
  • Resume Operations. As of the date it receives an SVO Grant, such applicant must be open or intend to reopen, as described for each category of applicant below.
  • Venue Requirements. Each category of qualified individuals or entities must comply with certain venue requirements as described in further detail below.

How does an individual or entity qualify as a Live Venue Operator?

To qualify as a Live Venue Operator, an individual or entity must:

  • Have a principal business activity of organizing, promoting, producing, managing or hosting live concerts, comedy shows, theatrical productions or other events by performing artists which (i) a cover charge is applied; (ii) the performers are paid in an amount based on a percentage of sales, guarantee or mutually beneficial formal agreement; and (iii) generate at least 70% of earned revenue through ticket sales, production fees/reimbursements, nonprofit educational initiatives or the sale of event food, beverages or merchandise; or
  • Have a principal business activity of making tickets available for purchase by the public at least 60 days in advance of live concerts, comedy shows, theatrical productions or other qualifying events for which a cover charge is charged and performers are paid based on a percentage of sales, guarantee or mutually beneficial formal agreement; and
  • As of the date it receives an SVO Grant, have resumed or intend to resume organizing, promoting, managing or hosting future live events.
  • “Cover charges” may include front door entrance fees, food or beverage minimums or other similar charges required for admission regardless of how such charge is collected.
  • The SBA defines “earned revenue” as monies that organizations receive from the sale of goods or services. Further, the SBA has clarified that earned revenue does not include other sources of funds such as donations, sponsorships, governmental assistance, returns on investments, foundation grants, corporate sponsorships, individual gifts and other gratuitous contributions.
  • Venue Requirements - the venues where events are promoted, managed or hosted must:
    • Have a defined performance and audience space, mixing equipment, public address system and lighting rig;
    • Have at least one individual to do two of the following activities: (i) sound engineer, (ii) booker, (iii) promoter, (iv) stage manager, (v) security personnel and (vi) box office manager;
    • Require paid tickets or cover charges for most performances;
    • “Fairly” pay artists (i.e., not performing for tips);
    • Market the performances through any form of media; and
    • Solely for nonprofit venues that produce free events, produce events managed primarily by paid employees and not volunteers.

How does an individual or entity qualify as a relevant museum operator?

To qualify as a relevant museum operator such applicant must operate a public, tribal or private non-profit agency or institution organized on a permanent basis for essentially educational, cultural heritage or aesthetic purposes. Additionally, as of the date it receives an SVO Grant such museum must be open or intend to reopen.

  • Operators of zoos and aquariums are also eligible as “relevant museum operators.”
  • Venue Requirements - such operators must have:
    • Been serving as a relevant museum operator as its principal business activity;
    • Indoor exhibition space which has been subject to pandemic related occupancy restrictions; and
    • At least one auditorium, theatre, performance or lecture hall with fixed audience seating and regular programming.
      • “Regular programming” is generally defined by the SBA as programming which is provided on an ongoing and near-continuous basis of an average of at least four times a month over the course of a year.

How does an individual or entity qualify as a motion picture operator?

To qualify as a motion picture operator, an individual or entity must have as its principal business activity the ownership or operation of at least one theatre, open to the general public for the purpose of showing movies for a fee. Additionally, as of the date it receives an SVO Grant, such theatre operator must have reopened or intend to reopen for the primary purpose of publicly showing motion pictures.

  • Venue Requirements - theatres must:
    • Have at least one auditorium which includes a movie screen and fixed audience seating;
      • The SBA has clarified that the seating must be permanently fixed to the ground or floor and that, as a result, operations such as drive-in theatres without such seating would not qualify.
    • Have a projection booth or similar space with at least one projector;
    • Require paid ticketing; and
    • Market movies through any form of media.

How does an individual or entity qualify as a talent representative?

To qualify as a talent representative an individual or entity must:

  • Book or represent musicians, comedians, actors or similar performing artists primarily at live events in venues or at festivals;
  • 70% of its operations must involve representing or managing such performers;
  • Such performers must be paid in an amount based on ticket sales, or similar basis; and
  • As of the date such talent representative receives an SVO Grant, be representing or managing artists and entertainers.
  • Venue Requirements - the venues where performers represented by such talent representative perform must:
    • Have a defined performance and audience space, mixing equipment, public address system and lighting rig;
    • Have at least one individual to do two of the following activities: (i) sound engineer, (ii) booker, (iii) promoter, (iv) stage manager, (v) security personnel and (vi) box office manager;
    • Require paid tickets or cover charges for most performances;
    • “Fairly” pay artists (i.e., not performing for tips);
    • Market the performances through any form of media; and
    • Solely for nonprofit venues that produce free events, produce events managed primarily by paid employees and not volunteers.

What is the maximum SVO Grant amount an eligible individual or entity can receive?

The maximum amount of SVO Grant proceeds an eligible individual or entity may receive is $10,000,000.

How is the amount of eligible SVO Grant proceeds determined?

  • Initial Grants. For an eligible individual or entity in operation on January 1, 2019, the amount of SVO Grant proceeds will be the lesser of:
    • 45% of gross earned revenue during 2019; or
    • $10,000,000.

For an eligible individual or entity not in operation on or prior to January 1, 2019, the amount of SVO Grant proceeds will be the lesser of:

  • Six times the average monthly gross earned revenue in 2019; or
  • $10,000,000.
  • Supplemental Grants. Eligible individuals or entities may receive a supplemental SVO Grant equal to 50% of the initial SVO Grant if, as of April 1, 2021, the revenues of such individuals or entities for the most recent calendar quarter do not exceed 30% of such revenues for the corresponding calendar quarter during 2019. Supplemental grants will not be awarded until all determinations of awards have been made for SVO Grant applications submitted within 60 days after the SBA begins accepting applications.

What can SVO Grant proceeds be used for?

The proceeds for an initial SVO Grant may be used for costs incurred between March 1, 2020 and December 31, 2021. Supplemental SVO Grants may be used for costs incurred through June 30, 2022. SVO Grant proceeds may be used for any of the following purposes:

  • Payroll costs, including, but not limited to, wages, salary, vacation and sick leave, dismissal or separation, group health benefits, state or local taxes assessed on employee compensation and retirement benefits (payroll costs are capped at $100,000 per year per employee);
  • Rent payments;
  • Utility payments;
  • Covered worker protection expenditures (such as installation of ventilation systems, physical barriers or expansion of indoor, outdoor or combined business space);
  • Principal and interest on mortgages incurred prior to February 15, 2020;
  • Principal or interest on other debt incurred prior to February 15, 2020;
  • Payments to independent contractors (capped at $100,000 per year for any individual employee of an independent contractor);
  • Maintenance expenses;
  • Administrative costs (including fees and licensing);
  • Leases in effect as of February 15, 2020;
  • Required insurance premiums; and
  • Advertising, production, transportation, and capital expenditures related to producing a theatrical or live performing arts production, concert, exhibition or comedy show; provided, however, that the SVO Grant cannot be primarily used for such production-related expenses.

Are SVO Grants subject to the same affiliation rules as PPP Loans?

No. The affiliation rules that apply to PPP Loans do not apply to SVO Grants. Each entity that meets the requirements for an SVO Grant shall be treated as an independent, non-affiliated entity; provided, however, that no more than five (5) of such affiliate business entities shall be eligible to receive an SVO Grant.

What entities are not eligible for an SVO Grant?

The Economic Aid Act prohibits the following individuals or entities from receiving an SVO Grant, even if they are otherwise qualified:

  • Any individual or entity who received a PPP Loan (or who has an unprocessed application for such PPP Loan) after December 27, 2020;
  • A business concern that is majority owned or controlled by a publically traded company;
    • The SBA defines “majority owned” in this context as at least 51% ownership interest in an entity held by a single individual or entity.
  • A business concern that received or is majority owned or controlled by another entity that received more than 10% of gross revenue from federal funding during 2019 (excluding certain relief provided under the Robert T. Stafford Disaster Relief and Emergency Act);
  • Presents live performances of a prurient sexual nature or derives more than a de minimis amount of gross revenue through the sale of products/services of a prurient sexual nature;
  • A business concern owned or controlled by an entity with at least two of the following characteristics:
    • Owns or operates locations in more than one country;
    • Owns or operates locations in more than ten states; and/or
    • Had more than 500 full-time employees as of February 29, 2020 (determined on a full-time equivalent basis).
  • An entity which does not have a place of business in the United States, does not primarily operate in the United States and does not make a significant contribution to the United States through the payments of taxes or use of United States products.

Is there a time limit to use SVO Grant proceeds?

Yes, any initial SVO Grant proceeds not spent within one (1) year and any supplemental SVO Grant proceeds not spent within eighteen (18) months of disbursement must be returned to the SBA.

Are there any reporting requirements?

The SBA is required to increase oversight of SVO Grant recipients. By the terms of the Economic Aid Act, such oversight may include additional documentation retention requirements such as (i) retention of four (4) years of employment records from the date of SVO Grant receipt and (ii) retention of three (3) years of other records from the date of SVO Grant receipt. The SBA is also authorized to review the use of SVO Grant proceeds, including potentially auditing recipients of SVO Grants and require repayment of any misspent funds.

* The information contained in this document is provided for informational purposes only. It should not be construed as business, legal, accounting, tax, financial, investment or other advice on any matter and should not be relied upon for such.

The information in this document may not reflect the most current developments as the subject matter is extremely fluid and may change daily. The content and interpretation of the issues addressed herein is subject to revision. Koley Jessen P.C., L.L.O. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this document to the fullest extent permitted by law. Do not act or refrain from acting upon the information contained in this document without seeking professional or other advice.

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