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What We Know About the Shuttered Venue Operators Grant
The Shuttered Venue Operators Grant (SVOG) program, part of the recently enacted Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) will provide $15 billion for a range of businesses, from live venue operators to movie theaters, museums and performing art centers, to offset financial losses related to the COVID-19 pandemic.
The program, administered by the U.S. Small Business Administration as part of the Consolidated Appropriations Act of 2021 (CAA), can provide eligible recipients up to 45% of their 2019 gross earned revenue.
While the SBA has not yet set up the application process, released required documentation applicants will need to provide, nor specified a date when grants will begin to be awarded, Ericksen Krentel is closely monitoring developments to provide assistance to the New Orleans area’s hospitality industry as more concrete details become available. If you are interested in applying for a SVOG loan, please contact us by clicking here
Eligibility requirements include, but are not limited to, businesses that:
- were fully operational on February 29, 2020,
- had gross earned revenue during the first, second, third or fourth quarter in 2020 that was no less than a 25% reduction from the same quarter in 2019.
As of now, businesses cannot apply for an SBA Paycheck Protection Program (PPP) loan and an SVOG at the same time. The SBA says entities must make an informed business decision as to which program will most benefit them and apply accordingly. If an applicant is rejected by one program, it will then be eligible to apply for the other.
ELIGIBILITY
Businesses eligible for the grant include:
- Live venue operators or promoters
- For venue operators, venues currently must be open, or intend to reopen. Venues must require a paid ticket or cover charge to attend most performances and ensure artists are paid fairly and do not play for free or solely for tips, except for fundraisers or similar charitable events.
- Theatrical producers
- Live performing arts organization operators
- Museum operators, zoos and aquariums who meet specific criteria
- Motion picture theater operators
- Talent representatives
- Talent representatives currently must be representing or managing artists and entertainers.
- Each business entity owned by an eligible entity that also meets the eligibility requirements
Entities that fall into one of the categories above and are owned by state or local governments (for example, museums or historic homes) are eligible to apply if the governmentally owned entity also acts solely as a venue operator, museum, etc. and not also include other types of entities.
For example, a city parks and recreation department that operated a bandstand in a public square along with running various nature parks would not qualify as an eligible entity for an SVOG. On the flip side, the following entities are eligible:
- A museum partially funded with state dollars or one that received CARES Act funding.
- A performing arts center owned and operated by a government, state college.
For a venue owned or operated by a nonprofit that produces free events, the events must be produced and managed primarily by paid employees, not volunteers.
The following will render a business ineligible to apply:
- It does not have a place of business located in the United States, does not operate primarily within the U.S., and does not make a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.
- It was not in operation as of February 29, 2020.
- It received a PPP loan on or after December 27, 2020.
- It is a publicly traded corporation or is majority owned and controlled by a publicly traded corporation.
- It presents live performances or sells products or services of a prurient sexual nature.
- It received more than 10% of gross revenue from federal funding in 2019.
- It owns or operates venues, theaters, museums or talent agencies in more than one country, owns or operates venues, theaters, museums or talent agencies in more than 10 states, and it had more than 500 employees as of February 29, 2020.
- Cannot have more than two of the following:
- Locations in more than 10 states
- Locations in more than one country
- More than 500 employees as of February 29, 2020
Restaurants that feature live music are also ineligible if the principal line of business is restaurant operation rather than live venue operation.
The SBA addresses other frequently asked questions, which can be found by clicking here.
GRANT SIZE
The initial grant will be the lesser of 45% of 2019 gross earned revenue or $10 million. If business started during 2019, then multiply average monthly gross revenue for each full month in operation during 2019 by 6.
Revenue shall be determined using an accrual method of accounting. Any amounts received under the CARES Act shall not be counted as revenue. While each qualifying business is eligible for its own grant, no more than 5 business entities of any affiliated group can receive a grant.
Initial grants will be disbursed by priority of applicants affected using the following tentative timeline offered by the SBA:
- The first 14 days will focus on businesses that suffered a 90% or greater revenue loss between April 1, 2020 and December 31, 2020
- The next 14 days will focus on businesses that suffered a 70% or greater revenue loss between April 1, 2020 and December 31, 2020
- After the first 28 days, the SBA will focus on businesses that suffered a 25% or greater revenue loss between one quarter of 2019 and the corresponding quarter of 2020.
Supplemental grants are available at 50% of the initial grant so long as the amount of the initial and supplemental grants combined are no more than $10 million. A supplemental grant is also available if, as of April 1, 2021, the revenue of the business for the most recent calendar quarter is at least 70% less than the revenues of the same quarter in 2019.
WHAT CAN AN SVOG BE USED FOR?
SVOGs are less restrictive than PPP loans and can be used for:
- payroll
- rent/mortgage
- utilities
- scheduled debt payments (no prepayment of principal)
- worker protection expenditures
- payments to independent contractors not to exceed $100,000 in annual compensation per contractor
- ordinary and necessary business expense
- administrative costs
- state and local taxes
- operating licenses in effect as of February 15, 2020
- insurance
- advertising
- capital expenditures related to producing a live performance incurred during the 22-month period from March 1, 2020 through December 31, 2021.
Any funds that remain unspent one year after the grant funding was received (18 months for supplemental grants) must be returned to the SBA.
NEED HELP?
Ericksen Krentel continues to monitor the ever-changing guidance and requirements for the PPP loan application process to assist you in receiving the maximum benefits allowable. Our team is ready to help create a customized approach for your organization to effectively, and correctly, apply for a PPP loan
If you are interested in applying for a SVOG loan, please contact us by clicking here
As questions or concerns arise, we ask that you contact us so we can address them as quickly as possible to ensure we continue to meet your needs. As a reminder, you can always monitor our COVID-19 Updates webpage by clicking here for the latest or monitoring our accounts on LinkedIn, Twitter or Facebook.
Forensic Accounting Consultant Tucker Thorpe contributed to this report.
About Ericksen Krentel
Ericksen Krentel CPAs and Consultants, founded in New Orleans, Louisiana in 1960 with offices in New Orleans and Mandeville, believes that serving as the clients’ most trusted adviser is grounded in going beyond the numbers.
That includes helping clients achieve their business and personal financial goals by providing innovative and exceptional services in the following areas: audit and assurance services, tax compliance and planning, outsourced CFO services and business valuations for a variety of industries; employee benefit plan audits; fraud and forensic accounting; business planning; IT consulting; loss calculations; and estate planning.
Learn more at www.ericksenkrentel.com.
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