Updated April 26, 2021, with new information
After opening April 8, then temporarily closing for technical difficulties, the Shuttered Venue Operators Grant (SVOG) program portal reopened April 26, 2021, for applications from eligible entities impacted by COVID-19. Guidance is available from the Small Business Administration (SBA) in the FAQ document and “Preliminary Application Checklist” they have been updating, a set of proposed regulations, and a new SVOG applicant user guide posted April 23.
The proposed regulations state that SBA will review complete applications in the order in which it receives them, based on the availability of funds and priorities related to the extent of the applicant’s revenue loss, so interested businesses should act quickly.
The SVOG program FAQ covers eligibility, application, use of funds, business size/employees, revenue, and subsidiaries, but questions around eligibility are unclear for some shuttered venues. SBA has been providing weekly updates, so continue to visit the page. A “Definitions” section in the FAQ provides information on over 20 different terms and how they are being used within the program, from “defined performance space” and “defined audience space” to “being paid fairly.”
The proposed regulations, published March 26, include additional definitions, more information on the application process and award distribution, lists of eligible and ineligible uses of funds, and other guidance.
In other SVOG news, the American Rescue Plan Act included the anticipated update that the SVOG program and 2021 Paycheck Protection Program (PPP) are no longer mutually exclusive, allowing organizations to qualify for both relief initiatives under certain conditions. Read more below.
About the SVOG program
The SVOG program includes over $16 billion in grants to shuttered venues, such as live venue operators or promoters, theatrical producers, live performing arts organization operations, museum operators, motion picture theater operators, and talent representatives. To be eligible, applicants generally must have experienced not less than a 25% reduction in gross earned revenue between corresponding quarters in 2019 and 2020, and must have been “fully operational” on Feb. 29, 2020. The proposed regulations outline additional eligibility requirements for each business type, as well as characteristics that make an entity ineligible related to funding, ownership, and more.
According to the SBA, eligible applicants may qualify for SVOGs equal to 45% of their 2019 gross earned revenue, with the maximum amount available for a single grant award of $10 million. (Applicants that began operations after Jan. 1, 2019, may qualify for the lesser of $10 million or their average monthly gross earned revenue for each full month in operation during 2019 multiplied by six.) $2 billion is reserved for eligible applications with up to 50 full-time employees.
How can SVOG funds be used?
Under the proposed regulations, grant funds must be used for the following:
- Payroll costs
- Certain covered rent, utility, or scheduled mortgage or debt payments (not including prepayment of principal)
- Defined “covered worker protection expenditures”
- Payments to independent contractors as reported on Form 1099-MISC, “not to exceed a total of $100,000 in annual compensation for any individual employee of an independent contractor”
- Other “ordinary and necessary business expenses,” including:
- Maintenance expenses
- Administrative costs, including fees and licensing costs
- State and local taxes and fees
- Operating leases in effect as of Feb. 15, 2020
- Insurance payments
- “Advertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production, concert, exhibition, or comedy show, except that a grant under this section may not be used primarily for such expenditures”
Grant funds cannot be used:
- To purchase real estate
- To make investments or loans
- For payments of interest or principal on loans originated after Feb. 15, 2020
- “For contributions or expenditures to, or on behalf of, any political party, party committee, or candidate for elective office”
- “For any other use as may be prohibited by the Administrator.”
SVOG and PPP
Under the SVOG program guidelines established in December’s Consolidated Appropriations Act, businesses that applied for or received a PPP loan prior to Dec. 27, 2020, were eligible to apply for a SVOG, but if a business applied for a first- or second-draw loan on or after that date, they would not be eligible for a SVOG, unless the PPP loan was declined.
The American Rescue Plan Act changed the rules so that an entity that receives a first- or second-draw PPP loan after Dec. 27, 2020, can apply for a SVOG, though their SVOG grant would be reduced by the amount of any PPP loans received after that date. (Amounts received before Dec. 27, 2020, will not reduce the SVOG amount.)
However, if the business is approved for a SVOG before they receive a PPP loan number, they are then ineligible for the PPP loan.
What is needed to apply?
The Preliminary Application Checklist, posted March 5 and updated March 11, provides a list of information and documentation that applicants will be required to be submit, and the proposed regulations provide additional detail. The required components are both financial and nonfinancial, and are different depending on the type of applicant (e.g., the requirements for a live venue operator or promoter are different from those for a talent representative). Applicants will need to provide tax returns, corporate documents, and a list of employees, among other items, and applicant-specific documents include floor plans and marketing materials. Not-for-profits have additional requirements of their tax-exempt status letter and indirect cost rate from cognizant agency (if applicable).
Regardless of the type of applicant, all will be required to provide a “written statement of need and assurance,” which according to the FAQ must include a good-faith certification that “the uncertainty of current economic conditions makes the grant necessary to support the ongoing operations of the eligible person or entity;" a statement that the entity intends to stay open or, if shuttered, reopen (including the estimated reopening date); and that the entity was “conducting business operations as of Feb. 29, 2020.”. The FAQ notes that there is no set format for this written certification but provides this example:
“Due to the uncertainty of current economic conditions, a grant is necessary to support the ongoing operations of SVOG, Inc., SVOG, Inc. started in business on Jan. 30, 1985, but was forced to close its doors on March 15, 2020 due to the pandemic. If it receives a grant, SVOG, Inc. intends to reopen on April 26, 2021 or sooner, as conditions and restrictions permit.”
What you can do now
There are few steps businesses should take before starting in the SVOG portal, to smooth their application experience:
- Apply for a DUNS number
- Apply to SAM.gov
- Compile the necessary information so you are ready to apply
- Conduct gross revenue analysis (2019 vs. 2020)
- Then, register for a SVOG account and submit your application
For more information or assistance with SVOG or other COVID-19 applications, reach out to your advisors.
Subject matter expertise
CPA, CGMA, Partner - Not-for-Profit & Education Industry Leader
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