Below we summarize key aspects of the eligibility requirements overview and preliminary application checklist published by the SBA on March 5, 2021.
Eligibility Requirements for All Businesses
The SBA’s March 5 guidance clarifies that, in order to be eligible for a Grant, an applicant must establish that it:
General Requirements
- Was fully operational on February 29, 2020.
- Had gross earned revenue during any of the first, second, third, or fourth quarter in 2020 that suffered not less than a 25 percent reduction from the gross earned revenue of such business during the corresponding quarter in 2019.
Ownership Restrictions
- Is not listed on a stock exchange, or majority-owned and controlled by an entity listed on a stock exchange.
- Does not have, or is not majority-owned and controlled by an entity with, all three of the following characteristics:
- Owns or operates venues, relevant museums, motion picture theatres, or talent agencies or talent management companies in more than one country;
- Owns or operates venues, relevant museums, motion picture theatres, or talent agencies or talent management companies in more than ten States; and
- Employs more than 500 employees as of February 29, 2020, determined on a full-time equivalent basis.
- Not majority-owned or controlled by an entity that received more than 10 percent of gross revenue from federal funding during 2019, excluding amounts received by such business under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
Prohibited Activities
- Does not (i) present live performances of a prurient sexual nature or (ii) derive, directly or indirectly, more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature.
- Has not received on or after December 27, 2020, any loan under the SBA’s Paycheck Protection Program. (Critically, please note that the American Rescue Plan Act of 2021, expected to be signed into law on March 12, 2021, removes this restriction and provides instead that the amount of any Grant received shall be reduced by the value of any PPP loan received on or after December 27, 2020).
Additional Requirements by Business Type
The following further eligibility requirements apply within each category of business specified below:
Live Venue Operator or Promoter, Theatrical Producer, or Live Performing Arts Organization Operator
Business Requirements
- One of its principal business activities is operating or using venues for eligible live events for which (i) a cover charge through ticketing or front door entrance fee is applied, and (ii) performers are paid in an amount that is based on a percentage of sales, a guarantee (in writing or standard contract) or another mutually beneficial formal agreement.
- Either:
- not less than 70 percent of the earned revenue of the business is generated through, to the extent related to a live event described immediately above, cover charges or ticket sales, production fees or production reimbursements, nonprofit educational initiatives, or the sale of event beverages, food, or merchandise; or
- one of its principal business activities is making available, for the purchase by the public an average of not less than 60 days before the date of the event, tickets to live events described immediately above.
Operational Requirements
- Has resumed or intends to resume organizing, promoting, producing, managing or hosting future eligible live events.
Facility Requirements
- Has a defined performance and audience space.
- Has mixing equipment, a public address system and a lighting rig.
- Engages one or more individuals to carry out not less than two of the following roles: a sound engineer; a booker; a promoter; a stage manager; security personnel or a box office manager.
- Requires a paid ticket or cover charge to attend most performances, and artists are paid fairly (rather than performing for free or for tips, except for fundraisers or similar charitable events).
- If owned or operated by a nonprofit entity that produces free events, the eligible live events are produced and managed primarily by paid employees, not by volunteers.
- Markets performances in printed or electronic publications, on websites, by mass email or on social media.
Motion Picture Theatre Operator
Business Requirements
- One of its principal business activities is owning and operating at least one place of public accommodation for the purpose of motion picture exhibition for a fee.
Operational Requirements
- Is open or intends to reopen for the primary purpose of public exhibition of motion pictures.
Facility Requirements
- Has at least one auditorium that includes a motion-picture screen and fixed audience
- Has a projection booth or space containing not less than one motion picture projector.
- Requires a paid ticket charge to attend the exhibition of motion pictures.
- Markets motion picture exhibitions through showtime listings in printed or electronic publications, on websites, by mass mail or on social media.
Museum Operator
Business Requirements
- Operates a “relevant museum,” as defined by the Economic Aid Act, meaning “a public, tribal, or private nonprofit agency or institution organized on a permanent basis for essentially educational, cultural heritage, or aesthetic purposes, that utilizes a professional staff, owns or utilizes tangible objects, cares for the tangible objects, and exhibits the tangible objects to the public on a regular basis. Such term includes museums that have tangible and digital collections and includes aquariums, arboretums, botanical gardens, art museums, children’s museums, general museums, historic houses and sites, history museums, nature centers, natural history and anthropology museums, planetariums, science and technology centers, specialized museums and zoological parks.”
Operational Requirements
- Is open or intends to reopen.
Facility Requirements
- Has indoor exhibition spaces that are a component of the principal business activity and which have been subject to pandemic-related occupancy restrictions.
- Has at least one auditorium, theater, or performance or lecture hall with fixed audience seating and regular programming.
Talent Representative
Business Requirements
- Not less than 70 percent of its operations are engaged in representing or managing two or more artists and entertainers.
Operational Requirements
- Is representing or managing artists and entertainers.
Facility Requirements
Not applicable.
Preliminary Application Checklist
As required by the Economic Aid Act, eligible Grant recipients must provide specific documents to support their eligibility and compliance with the requirements listed above. As of this writing, the SBA has not opened its online portal for applications. In the meantime, the SBA has provided the following preliminary list of supporting documentation that will be required:
All Applicants
Background Documents
- Written statement of need and assurance, which must include:
- A good faith certification that the uncertainty of current economic conditions makes the grant necessary to support the ongoing operations of the eligible person or entity.
- If the entity is currently in operation, a statement that the entity will remain in operation after receipt of the funds. If the entity is currently shuttered, the statement shall include the intent to reopen with an estimated reopening date.
- An assurance that the entity was fully operational on February 29, 2020, and that the funds will only be used for the allowable purposes established by law.
- Corporate documents (may include Articles of Incorporation, Certificate of Existence, Certificate of Organization, State LLC Agreement, Certificate of Formation, Articles of Information or Partnership Agreements).
- Government issued photo ID – front and back.
- Employee list with job titles and employee status (full or part time), which must include:
- Complete name.
- Description of an employee: e.g., full-time; part-time; temporary from employee agency, leasing concern, or through a union agreement; co-employed pursuant to a professional employer organization agreement; salaried; included in payroll; not included in the payroll; owner; officer; shared with affiliate; etc.
- Some individuals may require multiple designations in the description: e.g., “Jane Smith - owner, salaried, included in payroll; Joe Smith - owner, not included in payroll, shared with affiliate.”
- Number of hours employee works per month.
- Tax exempt status letter (only required for non-profit entities).
- It is also known as a “determination letter” and must confirm that the applicant meets the IRS criteria for being a tax-exempt charitable organization.
Financial Documents
- 2019 tax return.
- 2020 tax return, if filed.
- Quarterly income statements for 2019 and 2020.
- Copy of most recent audited financial statement (2019) or single audit, if applicable, or link to a website where the report can be located.
- Indirect Cost Rate Agreement from Cognizant Agency, if applicable.
- Payroll statements covering 2/29/2020.
Standard Forms
Additional Required Documents by Business Type
Live Venue Operator or Promoter, Theatrical Producer, or Live Performing Arts Organization Operator
- Floor plan used for insurance purposes or local fire inspections, which demonstrates the location of the defined performance space (and plan of grounds if outdoor space is used for the performance venue).
- Documents (e.g., purchase receipts or insurance documents) to show that the venue has audio mixing equipment, a public address system and a lighting rig.
- Marketing materials listing event title, showtime, and price or entry requirements, which may include printed materials or social media posts.
- Box office/ticketing report that shows date, artist, ticket price and number of tickets sold.
- Provide the report for all February 2020 performances. If the venue was in operation but had no performances in February 2020, select one month between January 2019 and January 2020 and provide that report.
Motion Picture Theatre Operator
- Floor Plan used for insurance purposes or local fire inspections, which identifies the projection booth.
- Marketing materials listing motion picture titles and showtimes, which may include printed materials or social media posts.
- Box office/ticketing report that shows artist or event name, date, ticket price and number of tickets sold.
- Provide the report for all February 2020 performances. If the theatre was in operation but had no performances in February 2020, select one month between January 2019 and January 2020 and provide that report.
Museum
- Floor Plan (and plan of grounds if outdoor space is used for the performance venue).
- State or local COVID-19 occupancy restrictions demonstrating limits on occupancy.
Talent Representative
- Examples of contractual/consultant agreements with talent represented and venues used, and evidence of booking.
- List of all individuals or acts represented and venues for which they were contracted to perform in 2019 and 2020, including performances canceled due to COVID-19.
For more detailed descriptions of the documents listed above, please refer to pages 2-4 of the SBA’s Preliminary Application Checklist.
A Final Note
Pillsbury attorneys can help clients interpret and assess the Shuttered Venue Operator Grants’ requirements as clients assess and strategize regarding the availability of various stimulus funds. We are proactively monitoring any forthcoming regulations and guidance in response to the new legislation. These and any accompanying materials are not legal advice, are not a complete summary of the subject matter, and are subject to the terms of use found at: https://www.pillsburylaw.com/en/terms-of-use.html. We recommend that you obtain separate legal advice.