March 2, 2021

This article was updated on 7/22/2021 with information regarding for-profit audit requirements. 

On December 27, 2020, the Consolidated Appropriations Act of 2021 (CAA) was signed into law. Amongst other COVID relief programs, the CAA establishes the Shuttered Venue Operators Grant (SVOG) program. This article answers some frequently asked questions about the SVOG program and provides links to additional resources.

Who is Eligible for SVOG?

The SVOG provides support for eligible live performing arts organization operators; relevant museum operators, zoos and aquariums who meet specific criteria; live venue operators or promoters; theatrical producers; motion picture theater operators; and talent representatives that have experienced significant revenue losses due to the COVID pandemic. Amongst other eligibility requirements, an entity must show that it experienced a 25% or greater reduction in gross earned revenues during at least one quarter of 2020 as compared to the corresponding quarter in 2019. Special rules apply to entities not yet in operation on February 29, 2020.

What is the Amount of the Grant?

The SVOG program will make up to $15 billion in grants to qualifying shuttered venues and will be administered by the Small Business Administration (SBA). Initial grants will equal 45% of an entity’s 2019 gross earned revenue with a cap of $10 million, and a second supplemental grant may also be made equal to 50% of the initial grant. Special rules apply to eligible entities commencing operations after January 1, 2019. Grants funds may only be used for payroll and other specific types of costs as outlined on the SBA’s SVOG website.

There is a reduction to the grant amount if the grantee received a Paycheck Protection Program (PPP) loan, either a first loan or a second loan, after December 27, 2020. In early March 2021, Congress passed the American Rescue Plan Act of 2021 (ARPA), and, as of this article’s publication date, ARPA had been sent to President Biden for signature. ARPA clarifies that SVOG applicants may apply for and receive a PPP loan after December 27, 2020. However, the amount of SVOG that would otherwise be awarded is reduced by the amount of the PPP loan.

When Can I Apply?

As of the date of this article, the SBA was not yet accepting applications from eligible entities. However, when the SBA opens the application process, be aware that there will be a tiered application process. The first 14-days will be limited to entities with 90% or greater gross revenue loss, the second 14-days will then be limited to entities with 70% or greater gross revenue loss, and then after that all other eligible entities can apply. For this purpose, revenue loss is determined by comparing gross revenue from the April 1, 2020 through December 31, 2020 time period to gross revenue from the same months in 2019.

What Should I do to Prepare to Apply?

To prepare to apply for a SVOG we recommend reviewing the information from the SBA on its SVOG website. The SBA is periodically updating information on this site, so check back frequently.

Your organization will need a Dun and Bradstreet (DUNS) number and will need to be registered with the U.S. government’s System for Award Management (SAM). A DUNS number may be obtained here and SAM registration may be completed here. The SAM registration process is estimated to take up to two weeks, so we encourage you to start the process as soon as possible.

Are There Restrictions on the Use of SVOG funds?

SVOG funds must be spent on eligible expenses and within certain time frames. Eligible entities not in compliance must return grant funds to the SBA. Eligible expenses include payroll costs, rent, utilities, mortgage interest and principal, interest and principal on debt incurred prior to February 15, 2020, worker protection expenditures, payments to independent contractors capped at $100,000 per contractor, and other ordinary and necessary business expenses.

First draw SVOG funds must be spent within one year of the date funds are received. If an organization receives a supplemental phase SVOG, it instead has 18 months from the date of the initial grant to expend the combined grant funds. In accounting for use of SVOG funds, organizations may look back to expenses incurred beginning March 1, 2020.

Is the Grant Spending Subject to Audit?

The SBA has posted an Assistance Listing for the SVOG program on the SAM website. Amongst other details, the Assistance Listing notes that SVOG funding will be subject to a Single Audit for not-for-profit SVOG recipients, and for-profit recipients must either have a Single Audit or an audit of the company’s financial statements. If you are applying for a SVOG be aware of the potential audit requirements and the related policy and documentation requirements to ensure compliance with how the funds are spent.

The SVOG program represents a potential significant source of government support for shuttered venue operators that have been hard hit by the COVID pandemic. If you have questions about the SVOG program, please contact a Clark Nuber advisor.

©2021 Clark Nuber PS. All rights reserved.

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.