The Curtain Rises on the SVOG

The Shuttered Venue Operators Grant (SVOG) program was created when the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Act) was signed into law on December 27, 2020. The Act provided small business owners with much-needed capital to help them survive the pandemic and included critical resources for the smallest businesses. A total of $16.25 billion has been appropriated towards funding the SVOG program. This aid had been long awaited and vigorously fought for by operators with venues that could not open and operate for the past year. Since late December, the Small Business Administration (SBA) has been building the platform to accept applications and fund the eligible recipients. The SBA application process is expected to begin on April 8, 2021 and is structured so that the first-priority venues will receive their funds first.

Which Businesses are Eligible?

To be eligible, the following must satisfy all of the requirements listed below. Live Venue Operator or Promotor, Theatrical Producer, or Live Performing Arts Organization that:

• Was fully operational on February 29, 2020
• Had gross earned revenue during any of the first, second, third, or fourth quarter in 2020 that demonstrated not less than a 25 percent reduction from the gross earned revenue of such business during the corresponding quarter in 2019
• Had one of its principal business activities of operating or using venues for Eligible Live Events for which (i) a cover charge through ticketing or front door entrance fee is applied, and (ii) performers are paid in an amount that is based on a percentage of sales, a guarantee (in writing or standard contract) or another mutually beneficial formal agreement
• Had not less than 70% of the earned revenue generated through cover charges or ticket sales, production fees or reimbursements, nonprofit educations initiatives, or the sale of event beverages, food, or merchandise
• One of its principal business activities is making available for purchase by the public an average of not less than 60 days before the date of the event tickets to live events
• Has a defined performance and audience space
• Has mixing equipment, a public address system, and a lighting rig
• Engages one or more individuals to carry out not less than two of the following roles: a sound engineer; a booker; a promoter; a stage manager; security personnel; or a box office manager
• Requires a paid ticket or cover charge to attend most performances and artists are paid fairly
• If a nonprofit, the events are produced or managed primarily by paid employees
• Markets performances in printed or electronic publications, on websites, by mass email, or on social media

In addition, the following business entities are eligible, with certain operational and facility requirements:

• Motion Picture Theatre Operators
• Museum Operators
• Talent Representatives

Additionally, each subsidiary business owned by an eligible entity that also meets the eligibility requirements on its own rights will qualify as an eligible entity.

Which Businesses are Not Eligible?

• Entities listed on the stock exchange or majority owned and controlled by an entity listed on the stock exchange
• Majority owned and controlled by an entity that owns or operates venues, relevant museums, motion picture theaters, or talent agencies or talent management in more than one country, in more than ten states, or employed more than 500 employees as of February 29, 2020 determined on a full-time equivalent basis
• Majority owned or controlled by an entity that received more than 10% of gross revenue from federal funding during 2019, excluding amounts received under the Robert T. Stafford Disaster Relief and Emergency Assistance Act
• Presents live performances of a prurient sexual nature or derive more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature

How Much Can I Receive?

Initial Grants - An entity in operation on January 1, 2019 will be eligible for a grant of 45% of their 2019 gross earned revenue. An entity that began operations after January 1, 2019 will be eligible for a grant totaling the average monthly gross earned revenue for each month it was in operation during 2019, multiplied by 6. The maximum amount a business may receive is $10 million. A venue or promoter who received a PPP loan on or after December 27, 2020, will have the SVOG reduced by the PPP loan amount.

Supplemental grants – the Administrator may make a supplemental grant equal to 50% of the initial grant if, as of April 1, 2021, the revenues of the business for the most recent calendar quarter are not more than 30% of the revenues for the corresponding calendar quarter during 2019

What can I use the fund for?

The SVOG grants are intended to help targeted industries recover their pandemic-related losses and, unlike the PPP, allows for broader use of the funds and certain additional expenditures.

The following costs incurred between March 1, 2020 and December 31, 2021:

• Payroll costs
• Rent payments
• Utility payments
• Scheduled mortgage payments
• Scheduled debt payments
• Worker protection expenditures
• Payments to independent contractors (not to exceed $100,000 in annual compensation per contractor)
• Other ordinary and necessary business expenses, including maintenance costs
• Administrative costs
• State and local taxes and fees
• Operating leases in effect as of February 15, 2020
• Insurance payments
• Advertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production

What costs are not eligible?

• Buy real estate
• Make payments on loans originated after February 15, 2020
• Make investments or loans
• Make contributions to political parties
• Any other use prohibited by the Administrator

What else do I need to know?

• Entities that were approved for a PPP loan prior to December 27, 2020 are eligible to apply for an SVOG; however, entities will be ineligible for PPP loans after they receive an SVOG
• If all SVOG funding is expended during the program’s initial phase, the SBA intends to issue zero dollar “placeholder” supplemental awards that could subsequently be modified to add funds in the event Congress appropriates additional monies for the program.
• If a for-profit SVOG grantee expends more than $750,000 in federal funding in one fiscal year it will have the option of either providing a Single Audit or submitting an audited financial statement for that fiscal year during the audit period
• The grant will not be included in taxable income
• Recipients of the SVOG are ineligible to apply for the Restaurant Revitalization Fund
• SVOG funds cannot be used to pay any portion of an employee’s salary covered by an Employee Retention Tax Credit
• Recipients of the SVOG in the initial phase will have one year from the date their awards are disbursed by the SBA to use grant funds. Those who receive grants in the Supplemental Phase will have 18 months to expend their combined grant funds
• Depending on certain circumstances, some SVOGs will be disbursed in the form of a single lump sum while others will be spread out over multiple payments

When can I apply?

The SBA is expected to start accepting applications on April 8; however, grants will be prioritized as follows:

• First 14 days of grant awards will be available to entities that suffered a 90% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic
• Next 14 days of grant awards will be available to entities that suffered a 70% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic
• Beginning 28 days after the first and second priority awards are made, grants will be available to entities that suffered a 25% or greater earned revenue loss between one quarter of 2019 and the corresponding quarter of 2020
• After all priority periods have passed, grants will be available to recipients of first, second, and third priority round awards who suffered a 70% or greater revenue loss for the most recent calendar quarter as of April 1, 2021 or later

What do I need to apply?

Please refer to the checklist available on the SBA website, as well as the most recent FAQs.

Also, it would be in your best interest to register for a DUNS number so you can then register in the System for Award Management (SAM.gov), and visiting www.sba.gov/svogrant for up-to-date information on the application process. If you have any additional questions, please contact a member of the Restaurant & Hospitality Practice.