SBA Halts Its $16 Billion Shuttered Venue Operators Grant Program on Day 1

Live venue operators, promoters, and theater owners’ hopes were dashed yesterday, as technical issues throttled Day 1 of the Small Business Administration’s $16 billion Shuttered Venue Operators Grant (SVOG) program.

The grant program, run directly through the SBA, was expected to launch on April 8 at 12 p.m. Eastern–more than 100 days after the Economic Aid Act authorized the program at the end of December. Eligible applicants can apply for grants equal to 45 percent of their gross earned revenue, up to a maximum of $10 million. 

A day later, not a single application has been processed, according to the SBA, which moved to temporarily shutter its portal at 4:15 p.m. The SBA made the call to shut down the portal, after working fruitlessly with its vendors to resolve the site’s issues.

“The launch of the SVOG has been a disaster at best,” says Michael Strickland, the founder and chair of Bandit Lites, a Knoxville, Tennessee-based lighting-design and installation company. The entrepreneur, who had a hand in crafting an earlier version of the SVOG program, says he received thousands of emails, texts, and calls regarding the botched launch. “I am unaware of anyone that has been able to upload a document.”

The cause of the glitch is unclear. The SBA says it conducted multiple tests of the application process in advance of the program going live. Yet its structure may be part of the problem. Several business owners on Twitter compared the SVOG’s first come, first serve application process to the Hunger Games, a series of books adapted for the silver screen that describe a kill-or-be-killed competition fought by desperate young people.

The program gives priority to the most economically devastated operations. For 14 days after the SBA begins making awards–not the date when it begins accepting applications–the agency will prioritize applications from entities with at least a 90 percent revenue loss between April and December 2020. Following that is another 14-day period for entities with revenue losses of 70 percent or more, over the April to December period. The SVOG then opens up to those that suffered at least a 25 percent drop in earned revenue from one quarter in 2020, over the corresponding quarter in 2019.

Given this structure, the SBA spokesperson Andrea Roebker tells Inc. the agency opted to shut down the portal to ensure fair and equal access once reopened. “This decision was not made lightly as we understand the need to get relief quickly to this hard-hit industry.”

While technical issues proved problematic, Strickland also notes the presence of widespread confusion among grant seekers trying to understand their own eligibility. For starters, the SBA’s FAQs don’t gibe with the statute in a few areas. One example: In a question regarding how a performing arts organization operator is defined, he points out that the SBA has introduced the words “create, perform, and/or present,” which he says are found nowhere in the law. And in another example: Strickland says on April 7 the SBA noted that entities would need to fill out Form 1368. A day later, it no longer requires it. The form requires three years of financial data, so those prepping to file probably wasted a lot of time, he adds.

Separately, the Office of Inspector General, the body responsible for independent oversight of SBA’s programs, issued an alert ahead of the launch, highlighting serious concerns with the control environment and the tracking of performance results in the SVOG program.

“SBA should take immediate action to reduce or eliminate risks by strengthening existing controls and implementing internal controls to address potential misuse of federal funds,” the report says. “Strong controls will ensure the SVOG program can effectively help eligible small business owners and entities that have suffered economic injury because of the Covid-19 pandemic.”

The rollout is not only seriously flawed, it’s also familiar. When the Paycheck Protection Program kicked off last April, it was riddled with tech problems. Between glitches with its website and the E-Tran system, the SBA’s back-end loan guaranty platform, the agency has seen this kind of overwhelm before. It’s just too bad worthy business owners are paying the price.