In December, Congress passed the $16 billion Shuttered Venue Operators Grant program to offer a financial lifeline to live performance and event venues, event promoters, movie theaters, museums, and talent representatives that have been decimated by the Covid-19 pandemic. But owners of entertainment companies tell The Intercept that the Small Business Administration, the agency tasked with administering the program, has outright denied many businesses that should qualify without any explanation.
At first, the SVOG program was plagued by technical problems that delayed its ability to accept applications for months. In June, two months after it started accepting applications, it had issued a mere 31 grants. But now the money seems to be flowing: As of September, it had issued over 12,000 grants. Instead, the problem at present is that many businesses are getting blocked from receiving the funds.
As of September 27, the SBA has denied nearly 30 percent of SVOG applications. Compare that with the Paycheck Protection Program — the $953 billion fund to help companies cover payroll and other expenses during the pandemic — which had approved 97 percent of applications as of May. While businesses can appeal the SBA’s decision, the agency doesn’t tell them why they’ve been denied, so they are left to guess based on complicated and inconsistent criteria.
And unlike the Restaurant Revitalization Fund, which had dispersed all of its $28.6 billion funding by June, the SBA has only awarded $11 billion out of the total $16 billion pot as of September 27, so there is still money left that could be awarded to more businesses.
The SBA has “created winners and losers in the same industry because of the arbitrariness of the awards,” said Andrew Preble, owner of escape room company Escape My Room in New Orleans. He was denied, and yet he knows that an escape room just blocks from his own received grant money.
The SBA has “created winners and losers in the same industry because of the arbitrariness of the awards.”
At least two lawsuits have been filed against the SBA over denials. Kaos Productions — which operates Spin Nightclub in San Diego, a live entertainment venue for onstage performances by musicians, DJs, bands, and individual artists — was denied on both initial application and appeal despite demonstrating that it met the eligibility criteria for live venues, including submitting a letter from the San Diego Police Department outlining its permit to operate solely as a live music venue and a letter from one of its direct local competitors endorsing its eligibility, according to its lawsuit. “Spin needs a SVOG award for precisely the reason Congress created the SVOG Program: to help eligible live entertainment businesses like Spin recover from the major setbacks they have experienced because of the pandemic,” the lawsuit states.
Colors Worldwide Inc., which promotes live onstage performances by DJs and R&B hosts in Los Angeles, was similarly denied on both initial application and appeal, despite including a letter from its certified public accountant verifying that its principal business activity is live venue promotion, according to its separate lawsuit. The SBA declined to comment on pending litigation.
The SVOG program was created specifically to aid venues that have been closed due to public health needs during the pandemic, and eligibility is strictly limited to live performance venues, movie theaters, and museums with indoor spaces. Yet some SVOG awardees include outdoor activities and spaces, such as a “margarita madness” 5K race in California, a cross monument on a hill in Illinois, and a golf tournament in Oregon, as well as a strip club, despite the program eligibility excluding “live performances of a prurient sexual nature.”
“The guiding statute for the SVOG program is complex and includes 83 eligibility criteria, which vary for each entity type. The SBA is determining eligibility based on these criteria,” SBA spokesperson Andrea Roebker said in an email.
“Because the SVOG program is emergency relief and the SBA wants to ensure all who are eligible do in fact receive funding, SVOG applicants were given the opportunity to correct mistakes and/or provide additional information to the SBA through a technical corrections process, which the SBA deployed over 9,000 times to support SVOG applicants,” Roebker said.
She noted that the SBA published an “eligibility matrix” for business owners to understand why they might have been denied and held “several” office hours and information sessions about the appeals process. All applicants who have been denied on their initial application can appeal the decision, she added, which she said is “rare for a federal grant program.”
She didn’t respond to a request for the number of denials that have been overturned on appeal, saying, “At this point, the SBA has issued very few final decisions on appeals.” On September 3, the SBA sent out an email telling applicants that had already had their appeals denied that the agency was going to “conduct a more comprehensive evaluation” of all appeals, according to an email shared with The Intercept.
Business owners decry what they say is a lack of transparency over denials. The agency refuses to tell them why a given application was denied, making owners feel like they’re shooting in the dark when they appeal. “It’s just very hard to have a successful appeal if you don’t know why you were denied in the first place,” Preble, the escape room owner, said.
Preble thinks the problem is that the SBA found itself trying to weigh in on what counts as art and entertainment. Preble knows that his line of business is new but argues that it’s live entertainment, not so different from a play. He says he met all of the criteria for a live venue, including actors who perform, lighting and sound systems, and employees who take care of ticket sales, marketing, and security. By a random stroke of luck, he says, he called his SBA office and reached someone who was willing to read the notes on his application as to why he was denied. “They said that even though we hired actors, it wasn’t considered a performance,” he said. “It’s such an arbitrary thing to just decide what is and isn’t a performance.”
“It’s such an arbitrary thing to just decide what is and isn’t a performance.”
Preble’s business was booming before early 2020; nearly every year since 2014, he had opened a new location or experience. But he’s yet to make any profit during the pandemic. Not only does an escape room require people to be inside together, but the vast majority of his business also comes from tourists, many of whom have stopped traveling to New Orleans. He reopened his doors in the summer of 2020 but was only serving between 15 and 20 percent of regular customers. Business picked up earlier this summer but dropped off as the Delta variant surged and Hurricane Ida hit the area. Meanwhile, costs have increased to keep the rooms sanitized and to space out groups of customers. “We have been incredibly close to bankruptcy throughout this whole time,” he said.
Preble eagerly followed the debate in Congress over whether and how to give funding to live venues. When the SVOG program passed in December, “it was a huge relief,” he said. The money would have allowed him to pay off the debt he’s taken on, including back rent and other fixed expenses he hasn’t been able to meet, and keep his business going.
“It seemed like we were going to get aid and staying open would make some sense,” he said. But had he known that he wasn’t going to get any of the grant money, he might have decided to stay shut over the last months and save his resources for when the world was more back to normal. Without SVOG money, he’s not sure that he can repay all of his loans or even keep operating for very long.
Shamrock Productions, a family-owned business that produces consumer trade shows in Farmington, Minnesota, has also been “crushed by the pandemic,” said Vice President Chris Navratil. Every show has been canceled since February 2020, meaning that the business hasn’t made any revenue. “I have not slept since March 2020,” she said. Shamrock’s first show of the pandemic is scheduled for December, but Navratil isn’t sure whether it will actually happen.
So she leapt at the chance to apply for SVOG money. She applied as a live venue promoter since her business takes care of everything for its events, including renting facilities, buying advertising, and bringing in live entertainment like singing acts. She spent two weeks putting her application together only to be denied without any inkling as to why. She sent in the application on August 5 and received the denial on August 12. She sent in an appeal on August 24 and still hasn’t heard anything back. She’s tried calling the SBA to find out why she was denied, but it refuses to answer her questions.
Navratil knows other businesses like hers that have gotten mixed messages when they contacted their congressional representatives — some said yes, businesses like hers qualify for the money, while others said no. “In Washington, there wasn’t even a set, who is this program for and who it is not for,” she said, with palpable rage. “It’s all over the board, there’s no rhyme or reason.” Some businesses just like hers have gotten the money, she said, while others have been denied like she has.
When I asked what it will mean if her denial doesn’t get overturned, she paused for a long time and sighed. “It means that we’re going to have a lot of sleepless nights,” she said.
“We did our part, we closed our doors, our business has suffered,” she added. “Quite honestly, the government has an obligation to help us survive.”