Federal Program Offers Relief to Shuttered Entertainment Venues

By Christopher A. Cacace |  Polina Inberg  |  February 15, 2021

The Shuttered Venue Operators Grant (SVOG) program was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act. The program includes $15 billion in grants to shuttered venues, to be administered by the SBA’s Office of Disaster Assistance.

For an eligible entity in operation on January 1, 2019, grants will be provided for an amount equal to 45% of its 2019 gross earned revenue OR $10 million, whichever is less.

For an eligible entity that began operation after January 1, 2019, grants will be provided for the average monthly gross revenue for each full month the entity was in operation during 2019 multiplied by six OR $10 million, whichever is less.

Who Is Eligible?

The following entities are eligible to receive grants under the program:

• Live venue operators or promoters,  theatrical producers or live performing arts operators, relevant museum operators, zoos and aquariums that meet specific criteria;

• Motion picture theatre operators;

• Talent representatives; and

• Entities of the above types owned by a state or local government are eligible to apply if the government-owned entity also acts solely as a venue operator, museum, etc. and does not also include other types of entities.

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

The terms “live venue operator or promoter, theatrical producer or live performing arts organization operator” is defined as an individual or entity that, as a principal business activity, organizes, promotes, produces, manages, or hosts live concerts, comedy shows, theatrical productions, or other events by performing artists for which a cover charge through ticketing or front door entrance fee is applied and the performers are paid a mutually beneficial amount.  A minimum of 70% of earned revenue must be generated, to the extent related to a live event, cover charges or ticket sales, production fees or reimbursements, nonprofit educational initiatives or the sale of event food, beverages, or merchandise.  This applies to an individual or entity which operates for profit, is a not-for-profit organization, is government-owned or is a corporation, limited liability company, or partnership or operated as a sole proprietorship.

The term “motion picture theatre operator” is defined similarly to the above related to live performing arts.

The term “talent representative” is defined as an agent or manager not less than 70% of whose operations is engaged in representing or managing artists and entertainers; who books or represents musicians, comedians, actors or similar performing artists primarily at live events in venues or at festivals; and represents the performers who are paid in an amount that is based on the number of tickets sold or a similar basis.  Talent representatives include an agent or manager who operates for profit, is a not-for-profit organization, is government-owned or is a corporation, limited liability company or partnership or operated as a sole proprietorship.

The SBA’s Frequently Asked Questions posted on February 12, 2021 state that “it is possible” for a theatrical production management business with revenues generated by the production(s) to be eligible to apply for an SVOG under the talent representative definition.  From there the guidance clouds the prospects for these critical businesses, saying that under the Economic Aid Act the entity may be eligible to apply if, as its principal activity, it has production tickets available for public purchase an average of not less than 60 days before the performance date.   We are hopeful that additional guidance to potential SVOG recipients in this industry will be forthcoming.

Other Items

The SBA clarified whether an entity may apply for a second draw PPP loan and decide to accept it later if it did not receive an SVOG, saying that entities cannot apply for a PPP loan and an SVOG at the same time.  Applicants rejected by one program would then be eligible to apply for the other.

Requirements:

1. The business must have been in operation as of February 29, 2020.  The entity will still be eligible to apply if it was not in business in 2019 but was fully operational on February 29, 2020, as long as it can demonstrate the required level of revenue loss.

2. An entity is not eligible if it applied and was approved for a PPP loan after December 27, 2020.  Entities cannot apply for a PPP loan and an SVOG at the same time.  An applicant would need to wait to be rejected by one program in order to be eligible to apply for the other.

The SBA is in the process of setting up a grant program and is not yet accepting applications.  Below is the schedule in which order applications will be processed. 

First Priority 1st 14 days of grant awards	Entities that suffered a 90% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic.
Second Priority Next 14 days of grant awards	Entities that suffered a 70% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic.
Third Priority Beginning 28 days after first & second priority awards are made	Entities that suffered a 25% or greater revenue loss between one quarter of 2019 and the corresponding quarter of 2020.
Supplemental Funding Available after first & second priority awards are made	Recipients of first and second priority awards who suffered a 70% or greater revenue loss for the most recent calendar quarter (as of April 1, 2021 or later).

What you can do now to get ready to apply:

1. In order to get ready for the application process, it is recommended to register for a DUNS number (https://www.dnb.com/duns-number/get-a-duns.html)  and then register in the System for Award Management. (https://www.dnb.com/duns-number/get-a-duns.html).

2. Gather documents that demonstrate the number of employees you had over the prior 12 months.

3. Determine the extent of the gross earned revenue loss you experienced for 2020 as compared to 2019.

Currently, there are still many unanswered questions regarding the SVOG program.  We will be posting additional updates and guidelines as they become available from the SBA.

Please contact Christopher Cacace, Partner-in-Charge of the Theater, Media and Entertainment Group at Marks Paneth and Partner-in-Charge of the firm’s Westchester office, if you have any questions about this article. Polina Inberg, Director in the Theater, Media and Entertainment Group, contributed to this article.

About Christopher A. Cacace

About Polina Inberg