SBA Opens (and Closes) the Shuttered Venue Operators Grant Program

April 15, 2021 | Article

By Kim Hunwardsen, CPA and Christine Perez

The highly anticipated Shuttered Venue Operators Grant (SVOG) Program launched through the SBA on April 8, 2021. However, within hours, technical issues resulted in the SBA suspending the application portal. The SBA has now announced the portal for Shuttered Venue Operators Grant applications will reopen on April 26. Interested applicants should register in advance through the portal.

What is the Shuttered Venue Operators Grant Program?
The SVOG program will provide much needed economic relief to eligible nonprofits (and other organizations) that have been shuttered due to the effects of the COVID-19 pandemic. The Program, which was originally established by the Economic Aid to Hard Hit Small Businesses, Nonprofits and Venues Act and supplemented recently by the American Rescue Plan Act (ARPA), will provide an estimated $16.25 billion of funding for these hard-hit organizations.

Who is Eligible for the SVOG Program?
The legislation allows the following applicant types to apply for the SVOG within the performing arts industries (with specific guidelines for each):

  • Theatrical productions
  • Motion picture theater operators
  • Live performing arts organizations
  • Live venue operators
  • Relevant museum operators, zoos and aquariums that meet specific criteria and talent representatives

Applicants must have been in operation as of February 29, 2020 and must be able to provide formal documentation (i.e. governing documents or tax return copies) to prove eligibility. Nonprofits that received more than 10% of their 2019 gross revenue from the federal government (not including disaster assistance), or that operate venues in more than one country, in more than ten states and have more than 500 employees as of February 29, 2020, are not eligible. Organizations that meet multiple entity types should select the entity type that best represents the organization overall or gives the strongest case for SVOG eligibility.

What is the Grant Amount Available to Applicants?
Eligible applicants may qualify for grants equal to 45% of their gross earned revenue, with the maximum amount of a single award set at $10 million. Applications will be received and awarded by the SBA on a rolling basis as detailed below in the SVOG Priority Tiers section. The grant amount will differ depending on whether an organization was in operation as of January 1, 2019.

How and When Can Organizations Apply for the Shuttered Venue Operators Grant Program?
All applicants that meet the eligibility requirements may apply for the SVOG when the portal (found on the SBA SVOG webpage) is active on April 26. Organizations do not need to wait to apply on their specific priority ‘tier’ or group window. The SBA will process grant applications according to the legislation specifications. IRS Form 4506-T is required to be completed with the SVOG application and provides financial information specific to the applicant. Form 4506-T must be accurately completed in order to avoid rejection. All nonprofit applicants are required to submit their 2019 Form 990 return as well as the 2020 first quarter Form 941 with the application forms.

Nonprofit applicants should have an account registered in the System for Award Management (SAM.gov) prior to application. It is important to note this is not an automatic registration. In order to register in SAM, an organization must also have a DUNS number (dnb.com). According to the SBA, organizations should be aware this process can take up to 2 weeks. It should also be noted that the SAM registration must be updated annually for registration to remain active.

SVOG Application Requirements
Applicants should create an account on the SBA application portal and enter all information in the required fields. Applicants should also be prepared to upload all required documentation via .pdf, .jpg, .xls, and .doc files through the portal. It is anticipated that the SBA will release additional instructions via an applicant user guide.

All nonprofit applicants are required to provide a written certification of need, organizational documents, tax exemption certification, as well as employee lists as of February 29, 2019. Financial documentation and 2019 tax returns are mandatory. The 2020 Form 990 copy should be submitted as soon as it is filed with the IRS; applicants can receive a first disbursement without submitting the 2020 Form 990 but cannot receive subsequent disbursements until submitted.

A nonprofit with a fiscal year-end may submit 2018 and 2019 Form 990 copies as part of the application, but it is not clear what will be required to obtain disbursement. Nonprofit organizations should also be prepared to upload quarterly 2019 and 2020 statements, payroll documentation as well as copies of the most recent audited financial statements and single audit, if applicable. All entities will have additional documentation requirements based upon their venue type; these requirements are located on the SBA’s SVOG webpage, as is a checklist of needed documents.

It has come to our attention that some of the information requested on the live application opened on April 8 differed from the preliminary applicant checklists and requirements as shown on the SBA website. Organizations should be flexible and prepared to provide additional information as they work through the SVOG online application.

Good Faith Certification
The organization will need to provide written certification that the uncertainty of current economic conditions makes the grant necessary to support ongoing operations. A nonprofit that is currently in operation must formally state they will continue to operate after the receipt of funds; an entity that is currently closed should provide an estimate of the date it will reopen.

What are the SVOG Priority Tiers?
SVOG applications will be processed and awarded by the SBA on a rolling basis via a series of priority tiers. Nonprofits should apply as early as possible, but they may apply at any time until funds are exhausted. For the first 59 days after the program opens, the SBA has reserved no less than $2 billion of SVOG funds for entities with 50 or fewer employees. The SBA has indicated that an application that is not processed during its stated tier due to demand will be placed at the front of the processing for the next tier; in general, applications will be reviewed on a first come, first served basis.

  • First Priority Period – Awarded during the first 14 days of the program selection phase and available to organizations that have suffered a 90% or greater loss in gross revenue between April 1 and December 31 of 2020 as compared to the same period of 2019 due to COVID.
  • Second Priority Period – Awarded days 15 through 28 of the program selection phase and available to organizations that have suffered a 70% or greater loss in gross revenue due to the COVID-19 pandemic between April 1 and December 31 of 2020, as compared to the same period in 2019.
  • Third Priority Period – Awarded beginning on day 29 of the program selection phase and is available to organizations that have suffered a 25% or greater loss in earned revenue in at least one quarter of 2020 as compared to 2019.
  • Supplemental Funding – Sixty days after all applications for initial grant submitted have been processed, supplemental grants will begin to be administered. Supplemental funding, if available, will be awarded to first, second and third priority recipients that suffered a 70% or greater loss in revenue for the first calendar quarter of 2021 as compared to the first calendar quarter of 2019. The supplemental grant will equal 50% of the priority grant received, but subject to funds availability and the priority grant cap of $10 million. These funds will be issued pursuant to a separate application process. If funding is not available, the SBA will issue zero-dollar supplemental placeholder awards in the case that Congress provides additional funding in the future.
  • 50 or fewer “full-time” employees – In addition to the priority periods funding, certain funds have also been set aside for the first 60 days of the program for applicants with 50 or fewer full-time employees.

Note that the first and second priority tiers define revenue as “gross revenue” and for the third tier it is “earned revenue.” For the calculation of gross revenue, organizations are required to include contributions, donations, investment returns and grants even if their use is restricted; disaster assistance may be excluded. Earned revenues, however, will only include monies from the sale of goods or services, including facility rentals.

How Do Awards Affect Proposed Budgets?
The SBA will calculate a proposed award based upon the proposed budget; however, the SBA is not bound to the proposed award and an applicant can reduce the amount as necessary by reducing their proposed budget. The proposed budget details the manner in which the funds will be used by the organization; it is not the overall budget of the organization. Nonprofits will allocate the proposed award amount to different eligible expenditures such as payroll, rent and utilities. Organizations are required to report on the use of the funds and should be aware that expenditures should follow the approved budget. Deviations from the proposed or approved budget are allowed without prior approval from SBA so long as documented and, in general, not in excess of 10% of the allowable cost category.

How Are Grants Distributed?
The SBA will disburse SVOG grants based upon the size of the award and other risk factors. A grantee with a grant under $1 million that has provided a copy of their 2020 tax return may be deemed low risk and receive their grant in one lump sum disbursement. Organizations with larger grants will be deemed higher risk and will have their SVOG funds distributed in two to four separate disbursements.

Organizations that receive partial funding will need to submit Form SF-425, supporting documentation and the 2020 tax return in order to receive the additional SVOG disbursements. Multiple copies of the SF-425 may be required to be submitted by an organization to comply with risk requirements as well as with the final report. Depending on the size of the total grant disbursement, organizations should expect the SBA to conduct a certain number of audits.

What Are The Rules for Use of Funds?
SVOG funds must be used for eligible expenditures. Eligible expenditures include: payroll, rent, utilities, worker protection, administrative costs, insurance payments, certain leases, state and local taxes, advertising, production transportation, certain mortgage payments incurred prior to February 15, 2020, and capital expenditures, as well as other ordinary and necessary business expenses. Note that there are limitations on fund use for certain expenditure areas and funds may not be used to purchase real estate, make political contributions or make investments. Organizations may make payments to independent contracts so long as payments do not exceed $100,000 per contractor.

Priority grant funds should be used within a year from the date of the award and may be used for costs incurred between March 1, 2020, and December 31, 2021. Supplemental grant recipients have until June 30, 2022, to use these funds for allowable costs. Organizations therefore may look back to 2020 to document expenditures but should be aware that use of federal awards typically prohibits double dipping where expenditures have been reimbursed or utilized elsewhere. The SVOG program does allow for a broader use of funds in comparison to the PPP loan and EIDL programs and also covers a longer period for use. All nonprofits that receive SVOG grants must document the appropriate use of funds; all costs applied to the SVOG must be allowable, allocable and reasonable. Any priority grant funding not spent within one year of receipt and any supplemental grant funding not spent within eighteen months of receipt must be returned to the SBA.

How Does This Interact With Other COVID Relief Programs?
An organization is not prohibited from applying for the SVOG if it has or plans to apply for an EIDL loan. In addition, the recent amendment to the SVOG by the ARPA now allows organizations to apply for a first or second round PPP loan after December 27, 2020, and before the SVOG is received. Organizations should note that eligible SVOG funding will be reduced by the PPP loan amount received after December 27, 2020, and they are rendered ineligible for the PPP after the SVOG is received. PPP loans that were received prior to the December 27, 2020, deadline do not reduce the SVOG award. Because of the reduction in SVOG funds by the PPP loan amount, it is possible an organization may be better served by applying for and receiving a PPP loan in lieu of applying for the SVOG.

What Else Should Be Considered When It Comes to an SVOG?
Nonprofits that expend $750,000 or more in federal funds during their fiscal year are required to obtain a Single Audit. Receipt of the SVOG funds will count towards these federal funding requirements and organizations that will meet or exceed these limits should prepare accordingly. PPP loan funds do not count towards the single audit threshold and any deduction for these funds that reduce the SVOG award are not included. EIDL funds received should be added to the SVOG funding to calculate the reporting limits.

Applicants should review the SVOG program requirements and application documents available on the SBA website. Applicants are encouraged to review the SBA’s SVOG FAQs and video tutorials and to sign up for notifications from the SBA.


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