Key Takeaways from the 3.31.21 SVO Webinar
- Make sure you have checked all these items off your list before applying.
- Only 2020 PPP received on Dec 20, 2020 or later will be deducted from the SVOG award. Loans received prior will not.
- ALL recipients of PPP loans are eligible for the SVO grant, regardless of which PPP form they used.
- EIDL are considered federal finance assistance. Organizations that received EIDL or advances/loan have to add these funds to the SVOG award amount.
- Once the SBA application portal opens, the SBA will no longer be able to assist you with your application. Please visit here for local assistance.
~ Much of the information on this document is paraphrased personal correspondences from Nina Tunceli, from Americans for the Arts and the National Association of Theatre Owners from Mar. 4, and Mar. 1, respectively. ~ Last updated 4.6.21.
The Small Business Association (SBA) has updated their FAQs yet again. A full description is found in the FAQs, but the below clarifies key points that have caused confusion.
The majority of these points are directed towards film exhibitors; but is useful to all interested applicants.
- If a PPP loan applicant applies and is approved for a PPP loan, the applicant cannot then cancel a PPP loan once applied for/in process or decline to accept an approved PPP loan to become eligible to apply for an SVOG.
- Receipt of pandemic-related or other assistance from state or local governments does not disqualify an eligible entity from the SVOG program, though an eligible entity must ensure that it does not claim any costs or expenses under its SVOG that it has already received reimbursement or other payment for under another award or program.
- SBA confirmed that mobile touring facilities, such as traveling tent shows and festivals can qualify as a shuttered venue.
For Museum or Movie Theatre Operators:
- A new theater owner or operator that was previously owned or operated by a non-SVOG eligible company (such as a publicly-traded company) is eligible for the SVOG as long as the sale of the theater to the new owner/operator was executed on or before 29 February 2020. Sales finalized after 2/29/20 would not qualify because the underlying theaters were not eligible entities as of the deadline
- The SBA will not permit companies to set up new EINs for specific locations that were not already independent eligible entities on or before 29 February 2020.
- The SBA has revised the definition of “principal business activity.” Along with the SBA size regulations, the SBA will consider the distribution of an entity’s receipts, employees and costs of doing business among the different lines of business activity in which its business operations occurred for the most recently completed fiscal year. An entity’s principal business activity will be the one in which it has the greatest combined amount of revenues, expenses, employees and work hours, assets, contracts, and other business activity as compared to all its other lines of business.
- Definition of an eligible “Performing Arts Organization Operator” has been defined as “any entity (including a theatrical management business) which meets the criteria established under the Economic Aid Act and whose principal business activity is to create, produce, perform, and/or present live performances for audiences in qualifying venues, including amphitheaters, concert halls, auditoriums, theatres, clubs, festivals, and schools.”
Gross or Earned Revenue?
- The SBA has determined that it will be using “gross revenue” to assess priority periods. See the Revenue section below for more information on the definition of “gross revenue.”
- The SBA will not be offering applicants an option to appeal if their application is declined. The SBA has not historically offered such appeals and will not make an exception in this case particularly given the volume of expected SVOG applicants and the potential for demand for SVOG funding to outpace supply.
- SBA has finally updated the SVOG chart of grants on their website to correctly reflect that Third Priority Grant losses of 25% will be based on “earned revenue.”
- For the First and Second Priority Grants, SBA has confirmed that eligibility will be based on minimum losses of 90% and 70% of gross revenue, respectively. However, there is still a possibility that certain revenue items, such as capital gains, could be exempted from the definition of “gross revenue.” Stay tuned.
- Regarding the SVOG rule that no more than 10% of an eligible entity’s gross revenue can come from federal resources, SBA has made some good changes. Neither state/local governments nor public universities will be subject to this provision now.
Small Business Set-Aside Grants
- For the $2 billion Small Business Set-Aside Grants (eligible entities with no more than 50 full-time employees), the legislation indicates that these grants are available to any eligible entity who has a minimum loss of at least 25% gross earned revenuebetween one quarter of 2019 and the corresponding quarter of 2020. However, the SVOG website does not reflect that. It merely says “revenue.” We know that these references may seem nuanced, but it makes an incredible difference with nonprofit entities and we continue to make that case with the SBA.
Use of Funds:
- SVOG awards will count toward the Single Audit Act threshold if an entity receives $750,000 or more in Federal grant funding during a single fiscal year.
- Depreciation is an allowable expense under SVOG in accordance with the principles outlined in 2 C.F.R. § 200.436.
- SVOG recipients will have one year from the date their awards are disbursed by the SBA to expend/use grant funds. If an eligible entity receives a Supplemental Phase SVOG, they will instead have 18 months from the date their Initial Phase award was disbursed by the SBA to expend all their combined grant funds (both Initial and Supplemental Phase awards). At the end of the applicable deadline, SVOG grantees must return all unexpended SVOG funds to the SBA. As a reminder, although recipients have 12 (or 18) months to spend grant funds, eligible expenses are only for those “costs incurred during the period beginning on March 1, 2020, and ending on December 31, 2021.”
- Per the SBA, an entity’s average number of full-time employees will be determined with reference to each pay period that falls, either in whole or in part, within the 12-month timeframe stipulated by the Economic Aid Act.
Another Note on Revenue:
- As described in the Application section above, the SBA will be using “gross revenue” to determine losses for purposes of priority periods. Gross revenue is “functionally equivalent to ‘receipts,’ which the SBA has defined under 13 C.F.R. § 121.104 as meaning ‘all revenue in whatever form received or accrued from whatever source.’ The SBA has stated that this will include contributions, donations, and grants from any and all sources (excluding any disaster assistance funding). Disaster funding for these purposes will include all CARES Act funding from the Federal government even if that funding was administered by a state rather than the federal government directly. This means that all CARES Act-funds regardless of how they are administered are excluded from the definition of “gross revenue.”
- “Earned revenue” does not include donations or other gratuitous contributions, such as foundation grants, corporate sponsorships and individual gifts. (Question 3). Earned revenue will be analyzed/reported net of sales tax, returns, and discounts. Amounts that represent the costs of taxes collected for and remitted to a taxing authority, refunds or returns, and post-sale discounts may be deducted from earned revenues. The SBA will use fiscal year 2019 earned revenues as the basis for determining the award amount for both Initial Phase and Supplemental Phase SVOGs.
Subsidiaries & Affiliates:
- For exhibitors that have multiple entities that consolidate revenues (such as a theater management company and an operating company), the SBA will allow the business owner to use a reasonable method of dividing revenue between the two entities.
- Seasonally-operated entities, will be able to use an alternative earned revenue loss comparison to the Q1 2021 to Q1 2019 method be used for supplemental award eligibility.