Everything You Need to Know About Shuttered Venue Operator Grants

Entertainment and Music | Michael E. Williams | Feb 01, 2021

The Consolidated Appropriation Act of 2021 signed into law on December 27, 2020 includes a $15 billion grant program that will be administered by the U.S. Small Business Administration (the “SBA”) to provide financial aid to struggling live venue operators and related businesses through Shuttered Venue Operator grants (referred to in the Save Our Stages Act) (“SVO grant”). This program is intended to offer much-needed financial support for performing arts venues, movie theatres, and museums.

Eligibility

To receive an SVO grant, one must satisfy certain eligibility requirements including

  • Having been “fully operational” as of February 29, 2020
  • Have 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 and
  • As of the date of it receiving an SVO grant, must have or intend to resume operations.

In addition, there are certain venue specific requirements and there is a requirement to make a certification that the uncertainty of current economic conditions makes the SVO grant necessary to support ongoing operations, similar to those required for Paycheck Protection Program (PPP) loans.

SVO grant recipients must be an entity or an individual that is a live venue operator or promoter, theatrical producer or live performing arts organization operator, a talent representative, a movie theatre, or a “relevant” museum. Each applicant’s eligibility also requires the following category-specific criteria be met:

Live venue operator or promoter, theatrical producer or live performing arts organization operator:

  • Must have a principal business activity of organizing, promoting, producing, managing, or hosting live concerts, comedy shows, or theatrical productions or other events by performing artists
  • Must charge a fee through ticketing or front door entrance fee
  • Must pay performers and
  • At least 70% of revenue must be made through ticket sales, production fees and reimbursements, nonprofit educational initiatives, or the sale of event food, beverages, or merchandise.

A motion picture theatre operator:

  • Must have as its principal business activity the ownership or operation of at least one place of public accommodation for the purpose of showing movies for a fee

A relevant museum operator:

  • Must operate a public, tribal, or private nonprofit agency or institution organized on a permanent basis for essentially educational, cultural heritage, or aesthetic purposes.

A talent representative:

  • Agent or manager where 70% of operations must involve representing or managing artists and entertainers
  • Must book or represent musicians, comedians, actors, or similar performing artists primarily at live events in venues or at festivals and
  • The performers that are represented must be paid in an amount that is based on the number of tickets sold, or a similar basis

Although a person or entity may satisfy the above criteria, they may still be ineligible to receive SVO grants. Those individuals or entities that are ineligible to receive an SVO grant include a public issuer, one that received 10% of its gross revenue from federal funding in 2019, a larger operator (categorized as one who owns or operates locations in more than one country, and/or more than ten States, and/or employed more than 500 full-time employees as of February 29, 2020), a PPP borrower that received or receives such funds after December 27, 2020, or an individual or entity that presents live performances of a prurient sexual nature or derives more than de minimis gross revenue through sale of products and/or services of a prurient sexual nature.

How Much Funding Is Available?

The total amount of SVO grants that any individual applicant may receive is capped at $10 million. There are affiliation rules that cap grants for an applicant and its affiliates that receive assistance so they cannot collectively receive more than $60 million in total.

Initial grants, which are subject to the $10 million cap for an eligible applicant that was in operation on January 1, 2019, are equal to 45% of the gross earned revenue of the entity during 2019. An eligible applicant that began operations after January 1, 2019, may receive a grant equal to 6x the average monthly gross earned revenue for each full month of 2019 that the eligible person or entity was operational.

Supplemental grants are available for those that receive an initial SVO grant. The supplemental grant is available if, as of April 1, 2021, the applicant’s revenue for the first quarter of 2021 is not more than 30% of the revenue for the first quarter of 2019. A supplemental grant will be equal to 50% of an initial grant and is subject to the total $10 million cap on all SVO grants received.

Allocation

SVO grants are to be allocated in an order of priority laid out in the Hard-Hit Act. The first priority period, which will be during the first 14 days of the program, may only be awarded to eligible applicants with revenue for the period from April 1, 2020 through December 31, 2020 that is not more than 10% of such applicant’s revenue during the same period of 2019 due to the COVID-19 pandemic.

A second priority period starts the next 14 days of the program, and the SBA may only award grants to otherwise eligible applicants with revenue for the period from April 1, 2020 through December 31, 2020 that is not more than 30% of the applicant’s revenue during the same period of 2019 due to the COVID-19 pandemic.

Thereafter, initial grants of any remaining funds will be made to all other eligible applicants.

When calculating revenue, one does not include amounts received under the CARES Act (as amended, such as PPP loans or other funding). Revenue is calculated on the accrual method of accounting.

What Grants Can be Used For

Initial grants may be used for costs incurred between March 1, 2020 and December 31, 2021, and supplemental grants may be used for costs through June 30, 2022. Any initial grant proceeds that are not spent on allowable expenses within one year and any supplemental grant proceeds not spent within 18 months of disbursement must be returned to the SBA.

SVO grant funds may be used for certain costs as defined in the PPP regulations such as:

Payroll costs including salary, wages, commissions, or similar compensation, and payment of cash tips or the equivalent, up to a $100,000 cap per employee on an annualized basis of cash compensation, payment required for the provisions of group health care or group life, disability, vision or dental insurance benefits, including insurance premiums, payment of any retirement benefit, payment of State or local tax assessed on the compensation of employees, and the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation up to the $100,000 cap.

Rent obligations for leasing agreement in effect before February 15, 2020

Utility payments including electricity, gas, water, transportation, telephone, or internet access, for which service began before February 15, 2020

Covered worker protection expenditures including operating or capital expenditures

Interest payments for mortgages/debts incurred prior to February 15, 2020

In addition, payments to independent contractors (capped at $100,000 in annual compensation for any individual employee of an independent contractor), and other ordinary and necessary business expenses, including maintenance expenses, administrative costs, state and local taxes and fees, required insurance payments, and more.

For more information on SVO grants, PPP Loans, and other COVID-19 Relief measures available to you, contact your Prager Metis advisor today.

2021-08-20T10:59:56-04:00