In September, one owner of a small New York City jazz club told the New York Times there was a 50% chance his business wouldn’t reopen. “Small clubs like us are not going to exist anymore,” Ken Sturm said.
Meanwhile, in March, the Alamo Drafthouse announced it was filing for Chapter 11 bankruptcy protection. The company, which operates about 40 dine-in movie theaters across the country, will sell its assets as a way to raise financing to endure the pandemic.
It’s been a bleak year for much of the entertainment industry, devastated by shutdowns and cancellations because of the pandemic. Between 2018 and 2019, Broadway musicals generated over $1.43 billion in gross revenue, according to a report by the Broadway League. Theaters and performance centers, once the lively cultural centerpieces of American cities, are now strapped for cash.
The new stimulus package, which was passed in December, includes critical aid for performance venues, theaters, talent managers, and museums. The $15 billion in Grants for Shuttered Venue Operators was spearheaded by a group of independent promoters who lobbied Congress. Unlike the Paycheck Protection Program (PPP) loans, these funds are grants that do not require repayment or forgiveness, and they are entirely new from the CARES Act of the spring.
Eligible businesses may receive up to 45% of their 2019 revenue, capped at $10 million. In the spring, businesses may receive a second payment at up to 50% of the first grant, as long as their 2021 first quarter revenues are not more than 30% of their 2019 revenue during the same quarter. The bill states that any funds a business received through the CARES Act, such as a PPP loan, does not count as revenue. Eligible individuals or business entities may not receive more than $10 million in total funding.
After a false start at the beginning of the month, the SBA reopened applications for the Shuttered Venue Operators Grant on April 26, ushering in a new wave of federal relief for small business owners. Find out if your business qualifies and how you can apply.
Who qualifies for these grants?
The bill states that live venue operators or promoters, theatrical producers, live performing arts organization operators, relevant museum operators, motion picture theatre operators, or talent representatives may apply.
A talent representative must be currently representing or managing artists and entertainers.
Live venue operators as defined by the bill must have the following:
- The venue has a performance and audience space, mixing equipment, a public address system, and a lighting rig
- Employees are responsible for at least two of the following roles: sound engineer, booker, promoter, stage manager, security personnel, or a box office manager.
- The venue requires a paid ticket or cover charge for people to attend most performances
- Artists are paid fairly and do not play for free or for tips, unless for fundraisers
- Performances are marketed through print, digital, or social media promotions
Motion picture theaters and operators must have at least one auditorium with a motion picture screen, fixed audience seating, and one movie projector. They must also charge for admission and market showings through print, digital, or social media promotions.
Museums must have indoor exhibit space as a principal function of the business and at least one auditorium, theater, or performance or lecture hall with audience seating and regular programming.
Applicants can apply for up to five business entities or affiliates.
How is eligibility determined?
All applicants must meet the following three requirements:
- Their business was fully operational on February 29, 2020.
- They can demonstrate at least a 25% reduction in gross revenue in the first, second, or third quarter of 2020 relative to the same period in 2019.
- As of the date the grant is given, the business intends to reopen to the public or otherwise resume organizing, promoting, producing, managing, or hosting future live events.
According to Billboard, the provision was written to focus on independent entertainment venues and promoters, excluding corporate firms and coffee shops that host occasional live performances.
Among several disqualifications, the business must not have more than 500 full-time employees as of February 29, 2020 or be owned or controlled by a public company. Applicants cannot own or operate venues in more than 10 states. The bill also cuts off adult venues such as strip clubs that present overtly sexual performances.
The bill sets $2 billion of the total grant funding aside for very small businesses that employ 50 or fewer full-time employees.
Where and when can businesses apply?
Applications for SVO grants opened on April 26 and the bill outlines a timeline for when applications will be processed.
The grant approval process prioritizes applicants with the greatest need. In the first 14 days, applicants with at least 90% lost revenue will be the first to receive grants. The next 14 days gives priority to applicants with at least 70% lost revenue. After 28 days, all other approved applicants will begin receiving funds.
How can recipients use the money?
Recipients may use the funds towards past and future essential expenses that keep their businesses running, such as paying employees and rent. The business must incur these expenses between March 1, 2020 and December 31, 2021.
Grant money may only be used for the following expenses:
- Rent and utilities
- Current mortgage payments (excludes advance payments)
- Debt acquired before February 15, 2020
- Independent contractors
- Worker protection
- Essential business expenses (such as maintenance and administrative costs, state and local taxes, and insurance payments)
Recipients may not use these grants to purchase real estate, invest, make political contributions, or loan the funds.
How will the grants be regulated?
Applicants are responsible for certifying that they are requesting aid in good faith. The bill states that the appointed administrator of the grants, which hasn’t been determined yet, will audit recipients.
According to the National Law Review, after receiving the grants businesses must keep four years of employment records and three years of all business records.
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